Gold recorded its first weekly loss since June, last week, after powering to record highs. The precious metal pulled lower from highs of $2080 before finding support near the $1880 level. While the precious metal has since bounced back, it appears to have found strong resistance near the $1950 level.
Healthy Correction
The recent decline from record highs appears to be a healthy price correction with Wall Street and Main-street projecting higher prices going forward. Supporting further rallies from current levels is strong demand and technical support, with the $2,000 mark appearing to be the immediate target.
The bullish momentum remains intact, with a number of participants jumping in and buying dips. The tremendous liquidity pumped into the market by central banks continues to work in the bullion strength. The low interest environment has also seen investors shun yields in favor of safe-havens such as gold.
Investors also remain attracted to gold, given the soaring tensions between the U.S and China. The two are entangled in a fierce standoff that has resulted in the closing down of embassies in the two countries. The rhetoric has forced investors to scamper for safety in safe-havens. The U.S stimulus stalemate between Democrats and Republicans has also taken a toll on the U.S dollar strength, conversely fuelling a buying spree on gold.
Gold Headwinds
However, a number of factors stand in the way of gold rallying back to record highs. The metal has continued to edge higher as a safe-haven in the aftermath of the COVID-19 pandemic. News of coronavirus vaccines continues to fuel demand for riskier assets, most of which appear to be trading at great discounts.
Strength in the U.S treasury yield is another development likely to work against gold as it tries to bounce back after the recent pullback. The 10-year Treasury note rose to its highest level in eight weeks, conversely taking a toll on the market’s gold sentiments.
Hopes of economic recovery in the wake of job numbers and retail sales coming in better than expected have also continued to fuel demand for risk. The result has been a sell-off of gold that is trading at record highs.
