Gold Price Analysis: Gold struggles to break the highs at the end of the week

Fundamental backdrop

It has been an eventful week in the macro markets as risk sentiment flip-flopping from day to day. Having said that the Dow looks set to close lower this week down around 3% or so at the moment leading into the close. The oil sell-off dominated earlier in the week and then there were many other issues including the Eurogroup not being able to come to an agreement, Gilead's drug reportedly not performing well in China and the BoJ stimulus bonanza. 

COVID-19 issues still persist but it seems that death rates and hospitalizations are slowing down. This is obviously due to the lockdown procedures being put in place. Once the restrictions are lifted medical experts are expecting a second wave of cases and hospitalizations and deaths could increase once again. There are many issues associated with the lockdown that are coming to the forefront. Transport companies have really struggled during this time with some in the UK talking to the government about bailouts. The retail sector has also been damaged along with restaurant business. It will take a long time to count the full cost of the coronavirus pandemic and some analysts fear the current forecasts do not paint the full picture of the damage it has caused to the economy. If that is the case then the gold rally could extend to level never seen before.

Italy COVID-19 cases increase +1.6% at 192,994 (prev. +1.4% at 189,973) and the death toll rises by +420 (+1.6%) to 25,969 (Prev. +1.6% at 25,549).

The New York COVID-19 death toll rises 1.2% to 15,941 (prev. +2.9% at 15,740).

UK COVID-19 cases rise to 143,464 (prev. 138,078) and the death toll rises to 19,506 (prev. 18,738); deaths rise by 684 (+4.10%) vs. yesterday's increase of 616 (+3.52%).

Technical picture

The gold bugs were unable to push the yellow metal past the previous wave high of USD 1747.82 and now the price has come off somewhat on Friday. The price is still comfortably above the USD 1700 psychological level. The chart below is the daily, but on the 4-hour chart the price stopped at the 76.4% retracement level which could indicate the start of a new wave 1-2 to the downside but more confirmation is needed to confirm this and that would be a break of the previous wave low at USD 1661.18. Moving back to the daily chart, the relative strength index indicator is showing a massive divergence over the last 3 price waves higher. This is also a negative sign and can indicate upside momentum might be slowing down. If the red trendline on the indicator breaks to the upside there would be a good chance the uptrend could resume and USD 1800 could be tested. All of the support and resistance levels are from the time that gold made a run up to nearly USD 2000 and these levels are still clearly useful today. All in all, the price is still in an uptrend and until the previous wave low has been broken the bulls are still in control.

Additional levels