The gold price started on positive foot Monday keeping the previous week positive momentum. Gold ended 2.6% higher the previous week amid the coronavirus outbreak. Fiscal and monetary relief packages by central banks and governments across the globe are gold positive as the precious metal act as a hedge against inflation.
On Friday U.S. House of Representative voted on $484 billion relief package to support small businesses and hospitals, while earlier today the Bank of Japan removed the limits of its Japanese Government Bonds and increased the purchases of corporate debt. The BOJ also cut the 2020 GDP forecast to -5% and predicts weak inflation at 0.4% well below the inflation target of 2%.
Gold price added over 18% since the March 16 lows that hit during the coronavirus sell-off. Worries of a deep global recession due to the coronavirus outbreak rise as disastrous economic data coming from around the globe have to shift investors attention to safe-haven assets.
A gradual reopening of the economy might improve the sentiment, and some profit-taking in gold at current level can’t be ruled out.
Gold price is 0.36% lower at $1,721 as the European morning trading session started with risk-on sentiment and positive stock markets. The technical picture is bullish for gold as it hovers close to eight-year highs. Long positions are sitting comfortably as long as the price holds above the 1,700 mark.
On the upside, the initial hurdle for gold price stands at $1,728 the daily top. More selling pressure might emerge at $1,738 the high from April 24. A break above might test the eight-year highs at 1,746 from April 14.
On the flip side, first support for the precious metal stands at $1,713 the daily low. If the gold price breaks below, the next support area will be met at 1,696 where the ascending trendline that started on March 20. Next support zone will be reached at 1,679 the low from April 22.