Gold price fell slightly today as traders took profits from its best week since the 2008/9 financial crisis. In the past five days, the price of gold has surged by more than 10% and passed the important resistance level of $1,700.
There are three main reasons why the price of gold has been on an upward trend. First, the dollar has been falling because of the Fed decision to print more money in what it called “open-ended quantitative easing.” This decision reminded traders of what happened last time the Fed did that.
Second, global risks have been rising because of Coronavirus. When risks rise, many retail and institutional traders rush to safe havens to find safety. Gold and treasuries are some of the best-known safe havens. As a result, we have seen increased demand for gold bars in Europe and the US.
Third, there have been disruption in the gold supply chain as the biggest refiners in Switzerland shut down their operations. This too, led to higher prices.
Finally, gold rallied in line with other asset classes, particularly stocks. The S&P500 and the Dow Jones have gained by more than 10% in the past five days. Similarly, other precious metals like silver and palladium have risen by more than 10% too.
On the daily chart, we see that gold price passed the psychologically-important resistance level of $1,700 this week. In most times, assets tend to pull back from these highs as bullish traders take profit. On the daily chart, we see that the price has now moved back to the channel joined by the red support and resistance lines. In the near term, I expect gold price to attempt to test the resistance of this channel at about $1,720, which is a few points above this week’s high.