The gold price trading higher for the second consecutive session despite the risk appetite has returned to markets and stock prices making seven-week highs. Positive news from the remdesivir clinical trials also boosted investors sentiment. Federal Reserve left interest rates at 0% – 0.25% and reiterated to do what it takes to support the economy.
Fed is committed to using all tools in promoting its maximum employment and price stability goals. Lower interest rates are gold positive as investors are buying gold to hedge for inflation in the low-interest rates environment. Investors await the ECB monetary policy decision later today; analysts expect to keep interest rates unchanged and increase the bond-buying program. The initial jobless claims will also drive the markets today as the last five weeks; the total jobless claims surpassed 26 million.
On the other hand, the dismal economic data continues from around the globe. The US economy contracted by 4.8% in the first quarter as the coronavirus pandemic shut down the economy and triggered a recession that will end the longest expansion on record. The BOJ cut the 2020 GDP forecast for the Japanese economy to -5% and predicts weak inflation at 0.4% well below the inflation target of 2%.
World Gold Council announced yesterday that gold investment demand, including bars and coins and gold-backed ETF investments, increased by 80% year-on-year to a four-year high of 539.6 metric tons in the Q1 2020.
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Gold Price Support and Resistance
Gold price is 0.50% higher at $1,720 in the early European session as the stock markets also started higher. The technical outlook is positive for the precious metal as it hovers above all major daily moving averages, close to eight-year highs. Bulls positions are sitting comfortably as long as the gold price holds above the $1,700 mark.
On the upside, first resistance for gold price stands at $1,721 the daily top. More selling pressure might emerge at $1,728 the high from April 24. A credible break above might test the eight-year highs at $1,746 from April 14.
On the other side, immediate support for the gold price stands at $1,709 the daily low. If the gold price breaks below, the next support area will be met at $1,694 the low from April 28. Next level for gold to watch on the downside is the low from April 22 at $1,678.
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