Gold Price Slides from 7-Year Highs; Could This Be the Start of a Reversal or Just a Pullback?
After rallying to its highest level in more than seven years, gold price has given up some of its gains in today’s trading. XAUUSD is trading around $1,736.52 after peaking at $1,764.94 yesterday–this was its highest level since November 2012. Could rising tensions between the US and China fuel another run in gold price to new multi-year highs?
Earlier this morning, the Chinese newspaper Global Times reportedly described US President Trump’s approach to the pandemic with ‘witchcraft.’ In response, the White House announced that it awarded a $354 million contract to a new company called Phlow Corp. According to the government, the fund is for the manufacture of medicine needed to treat the coronavirus which are currently only available in India and China.
In addition to this, US President Trump threatened to permanently freeze its funding to the WHO. The health organization, which has been labeled as a strong Chinese ally, has been given 30 days by Trump to make significant improvements in its efforts against the coronavirus pandemic.
As tensions rose, so did gold price. XAUUSD has bounced off from its intraday low of $1,727.26. This is because risk aversion, which in this case was sparked by political tensions, makes gold’s safe haven status more appealing to investors.
Gold price is currently trading around the 50% Fib level when you draw from the low of May 11 to the high of May 18. If there are enough buyers in the market around $1,736.40, we could soon see XAUUSD rally to yesterday’s highs at $1,764.81.
On the other hand, a close below today’s Asian session lows at $1,727.26 could mean that gold price may still fall to $1,715.50 where it could retest a previous trendline (from connecting the highs of April 14, April 23, and May 8).