Gold Price Analysis: The support zones are in sight

Fundamental backdrop

Equities have moved further into the red today as the S&P, Nasdaq and Dow are all lower following a negative session from the EU bourses. The issue for gold is the dollar strength as it trades around 0.23% higher pushing demand for the precious metal lower. Interestingly the fall in gold is much less than that of the indices. The general risk theme has been dominated by the drop in the price of oil. Both WTI and Brent fell heavily into the futures roll and yesterday the May WTI futures contract fell into negative territory. Gold could then rise as the market paradigm shift in the future and the dollar strength eases but this could take some time.

Italy COVID-19 cases rise +1.5% to 183,957 (prev. +1.3% at 181,228) and death toll moves +2.2% higher to 24,648 (prev. +1.9% at 24,114).

UK COVID-19 cases rise to 535,342 (prev. 124,743) and death toll rises to 17,337 (prev. 16,509); deaths rise by 823 (+5%) vs. yesterday's increase of 449 (+2.8%).

New York COVID-19 cases move +1.7% higher to 251,690 (prev. +1.9% at 247,512) and death toll rise 3.4% to 14,828 (prev. +3.5% at 14,347).

Lastly, Eurogroup Chief Centeno Tweeted: on the recovery fund a rapid sizeable EU stimulus plan is needed, he adds a possible tool is the euro area budgetary instrument (BICC) where there is a strong case to reflect its role and rethink its size. We are due to hear from the EU group on Thursday and the market are waiting in anticipation to see what kind of plan the northern counties are willing to accept as Italy and Spain still remain in a tough condition. 

Technical picture

The price of gold has pulled one percent lower on Tuesday after the US dollar pushed higher in a strong bout of risk aversion. Normally it is gold that benefits from the risk-off theme but it seems that the greenback is the asset of choice during the COVID-19 pandemic.

Having said this gold has managed to keep losses to a minimum as the indices sold off heavily. Looking closer at the price action the retracement stopped at USD 1667.92 one of the previous wave high points.

The support levels lower down do look stronger and if the market pushes lower the blue and green levels are holding at key Fibonacci points. It also seems the blue support level could align with the 200-period simple moving average providing the level with more gravitas. The bias is still negative for now (short term) and will only change if USD 1703.58 is taken out to the upside once again.

Additional levels