Welcome back to another week.

On Monday, the calendar isn’t expected to release any high impact economic event; therefore, the major focus will remain on the technical outlook of the market today. Gold prices closed at $1742.27 after placing a high of $1745.41 and a low of $1721.65. Overall the movement of gold prices remained bullish throughout the day. The rising fears of the second wave of coronavirus, along with the US-China cold war, gave a push to gold prices on Friday. At the ending day of the week, GOLD surged above 1745 level and posted gains on the back of increased safe-haven demand. It showed a bullish trend for the second consecutive week amid increased fears of the second wave of coronavirus.

The Southwest and Southern States of the US reported a continuous increase in the number of infected people and hospitalization rates, which caused rising fears of another lockdown. The fears of another lockdown and the continuous stimulus from central banks of all countries in order to support their economies raised bars for gold.

The fears of inflation have been raised by the increasing amounts of government and central bank fiscal & monetary support due to concerns of a renewed economic slowdown. Gold prices have strengthened by about 15% and have more potential for an uptick in the long-term.

China reported 32 new cases of coronavirus on Friday, and Germany has tested 400 workers at an abattoir in the Northern area for the virus. More than 8.38M people have been infected with this coronavirus throughout the world, and the numbers are continuously increasing. Gold gained on the back of increased fears of the second wave of coronavirus in the absence of a vaccine’s successful development.

Meanwhile, another report added to the upward trend of gold on Friday – about the speech of a Columbia University professor, Jeffrey Sachs. According to an influential economist, Jeffrey Sachs, the deepening cold war between the US & China was a bigger threat to the world than coronavirus. This report supported the increased uncertainty in the market and gave a push to already rising gold prices. Sachs warned that the world was heading towards a period of massive disruption without any leadership, and the divide between the two superpowers will only worsen it.

He added that the US was a force for division and not for cooperation as it was trying to create a new cold war with the dragon nation. He warned that if the prevailing strategy and approach were used and took hold, then it will only lead to greater controversy and greater danger.

He also highlighted that the US-China tensions were not only on the forum of trade but also on several other fronts. Last week, Donald Trump signed the legislation to authorize US sanctions against Chinese officials responsible for the repression of Muslims in Xinjiang province. The US also blamed China for the international spread of the infectious virus and for trying to destabilize the competing economy by doing so. The Trump administration also targeted Chinese telecom companies, including Huawei.

On the other hand, on Sunday, Chinese state media reported that the increasing tensions between the US & China could lead to a war with Washington if it continues to ignite tensions. The news came after the US deployed three aircraft carriers in the South China Sea. According to the report, China was carefully managing its military ties with the US following the policies of non-conflict, non-confrontation, mutual respect, and win-win collaboration. At the same time, the US increased its number of troops and military pacts and has conducted hostile exercises directed at China. This has left China with no option but to increase its defense budget.

On the data front, at 17:30 GMT, the Current Account Balance from the US showed a deficit of 104B against the expected deficit of 101B and weighed on the US dollar. The weak economic data from the US gave a push to rising gold prices on Friday.

Daily Technical Levels
Support Resistance
1719.46 1745.96
170.83 1760.83
1692.96 1772.46
Pivot point: 1734.33

The yellow metal gold has violated the triple top pattern around 1,742 level, and bullish trend continuation can lead to gold prices higher until 1,761 level. However, the overbought precious metal may exhibit profit-taking until 28.2% Fibonacci retracement at 1.742 level, and below this, the next support is likely to be found around 1,733 level.

Good luck!