Gold investors were treated to some excellent news on Monday, as gold climbed to an all-time high. In the Asian session, gold hit a high of USD1944.71, breezing past the previous record of USD1921.18, which had stood all the way since 2011.
Gold is a traditional safe-haven asset, and there a slew of reasons why nervous investors are seeking safe harbor. The most recent development is an escalation in tensions between China and the US. Last week, the US ordered the closing of the Chinese consulate in Houston, charging China with spying and stealing sensitive data. China has retaliated by closing the US consulate in Chengdu. As well, a spike in coronavirus cases across the world has put the markets on edge. Finally, a US pandemic stimulus bill is bogged down in Congress, at a time when the US recovery appears to have taken a step back.
The US dollar has shown broad losses against other major currencies, as the Federal Reserve has sliced interest rates close to zero and implemented other easing measures in order to stabilize the economy. It could be a rough road for the dollar this week. The Fed holds its monthly policy meeting on Wednesday, and there is talk that the Fed could add further easing measures, such as negative rates. This would be bearish for the dollar. As well, the US releases the first estimate of GDP for the second quarter, with the forecast standing at a staggering -35.0%. Even if the decline is substantially lower, it’s quite likely that investors would react negatively, sending the greenback lower and pushing gold higher. With the yellow metal climbing 8.7% in July, the lofty USD2000 level appears within striking distance.
XAU/USD Technical
XAU/USD is currently trading at 1936.15, up 1.82% on the day. The pair posted strong gains in the Asian session and has dipped lower in European trade
- 1917.95 is providing support. Below, there is support at 1909.41
- 1945.13 is the next resistance line