· Gold fell nearly 1% on Tuesday as risk appetite was boosted by some countries easing coronavirus-induced restrictions, although recession fears and hopes for more stimulus kept the bullion near the $1,700 level.
Spot gold eased 0.7% to $1,702.00 per ounce by 0701 GMT, after falling as much as 1.4% during the session. U.S. gold futures fell 0.4% to $1,716.20 per ounce.
· Some countries, including Italy and New Zealand, announced an easing of lockdowns and more parts of the United States looked set to restart business.
However, Britain's Prime Minister Boris Johnson said it was too dangerous to relax a stringent lockdown for fear of a deadly second outbreak.
· "The fact that we're seeing these attempts from different countries to at least partially reopen is providing some downside to gold," said Warren Patterson, an analyst at ING.
Business shutdowns have led to a record 26.5 million Americans filing for unemployment benefits since mid-March and are likely to push the unemployment rate to 16% or higher in the next report.
"The impact from the shutdown is going to be felt for quite some time moving forward through macro data and that will continue to support gold," said Patterson.
· Most Asian shares rose, while U.S. stock futures fell in choppy trade as oil prices slipped and offset optimism over certain economies reopening.
Against key rivals, the U.S. dollar edged up, making gold costlier for investors using other currencies.
· "The dollar index is putting pressure on the prices," said Jigar Trivedi, a commodities analyst at Anand Rathi Shares and Stock Brokers in Mumbai.
"The key triggers for gold this week would be European central bank and U.S. Federal Reserve meeting outcomes."
The two major central banks are expected to have their policy meetings this week, following the Bank of Japan which expanded monetary stimulus on Monday and pledged to buy an unlimited amount of bonds to keep borrowing costs low.
Bullion tends to benefit from widespread stimulus measures as it is often seen as a hedge against inflation and currency debasement.
While gold may be primed for further gains, lower physical demand from top consumers India and China might make the metal's strengthening harder to sustain.
· On the technical front, bullion may fall to $1,677, according to Reuters technical analyst Wang Tao.
· Gold Price Analysis: Head-and-shoulders breakdown on 1H
Gold is trading in a sideways manner around $1,708 per ounce at press time, having hit a session low of $1,705 a few minutes ago.
The hourly chart shows a head-and-shoulders breakdown. The bearish reversal pattern has created room for a sell-off to $1,694 (target as per the measured move method).
The daily chart, too, is reporting a bearish Doji reversal pattern – the yellow metal fell nearly 1% on Monday, validating or confirming the bull fatigue signaled by Friday's Doji candle.
The stochastic indicator has turned lower from the overbought territory, indicating scope for a notable pullback.
The metal could soon find acceptance under the former hurdle-turned-support of $1,703 (Mach 9 high) and extend losses toward $1,694. Alternatively, a strong move above $1,715 would invalidate the head-and-shoulders breakdown and open the doors for a re-test of the April 23 high of $1,739.
· Gold Price Prediction – Prices Slip Ahead of Fed Meeting
Technical analysis
Gold prices consolidated and eased following a week where the price of the yellow metal rose approximately 2.5% hitting a 7-year high The next level of target resistance is the April high at $1,747. After that level, gold could rally to $1,921. A break of this 2011 level would lift gold into blue sky territory. Short term momentum has turned negative as the fast stochastic generated a crossover sell. The current reading on the fast stochastic is 81, above the overbought trigger level of 80, which could foreshadow a correction. The MACD (moving average convergence divergence) index is sliding lower, reflecting decelerating positive momentum.
· Palladium rose 1.1% to $1,945.86 an ounce, platinum fell 0.2%, to $756.07 per ounce, while silver fell 1.9% to $14.99 per ounce.
Reference: Reuters, FX Street, FX Empire
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