Gold prices cracked above the 1,900 per ounce mark on Friday on the back of increased uncertainty over the state of the global economy.

A resurgence in covid-19 infections coupled with rising US-China tensions helped to bolster demand for the safe havens Japanese Yen, bullion, and US Treasuries. The greenback also received attention at first but lower than expected US manufacturing & services PMI figures released on Friday sent buyers packing, diverting their attention towards gold and Yen.

The yellow metal rounded off the week with a strong performance, its highest weekly gain since earlier this March. Gold is now up over 5 per cent for the week and some analysts are beginning to question whether the surge is sustainable at this price level. Many indeed are expecting a pullback to occur and pressure prices down to the 1,850 mark, a reasonable support zone for the long run.

Looking at the technical indicators, the RSI is currently sitting firmly in overbought territory, favouring the pullback scenario. Likewise looking at the weekly chart for guidance, the sharp uptick in March was met with a 0.60 per cent decrease in the following week. This was likely a sign that the market was overheating and needed to re-establish an acceptable baseline value before continuing to rise, which may be the situation for gold right now.

Building the case for further upside potential in gold is the speculation over whether or not the US Federal Reserve will engage in additional stimulus measures in the near term. The market seems to believe the central bank will continue to dump dollars into the system, which if true, should continue to pressure the US Dollar and support gold.

Investors may look to long conservatively at current price levels to take advantage of spill over demand through the weekend. The resistance and all-time high level of 1,920.31 is a likely target in the coming week should headlines fail to deliver positive developments in the US-China feud.

Support & Resistance Levels:

R3       2,000.00
R2       1,955.23
R1       1,920.31
S1        1,880.83
S2        1,864.29
S3        1,850.93

Analyzed by: Mr. Thibault Moirez, Independent Analyst