Gold appreciates $20 to approach long-term highs at $1.779

Gold prices have bounced up strongly at $1,747 lows, to regain lost ground and return to $1,765 area, a few pips below multi-year highs at $1,779. The deteriorated market sentiment amid the global increase of COVID-19 cases has increased demand for the precious metal.

XAU/USD closing in on multi-year highs

Investors’ fears about a second wave of coronavirus and the possibility of new restrictions that would cripple economic recovery have crushed appetite for risk, favoring safe assets like bullion. News about a global increase of infections, with the US reaching a single-day record on cases and Texas rolling back plans to reopen the state are dampening market hopes of a V-shaped recovery.

On the other hand, the risk-off sentiment has pushed the US dollar higher against its main peers, which is putting a lid on the gold appreciation. The US Dollar Index, which measures the value of the dollar against the most traded currencies, appreciated about 0.8% over the last three days although it remains slightly negative on weekly charts.

Declining real rates to push gold prices above $1800 – TDS

Gold prices are on track to a three-week rally that has pushed buillon to multi-year highs near $1,780 and, according to the experts at TD Securities, it might continue appreciating to levels above $1,800, “Covid fears have interrupted, but not canceled gold's imminent breakout. Indeed, the yellow metal's third attempt to break-out into the $1800s was interrupted by renewed virus concerns, which have paused the rise in long-term inflation expectations that we have seen over the past few trading sessions. Nonetheless, we expect that growing confidence in the economic recovery, amid extremely low rates volatility, will help long-term inflation expectations continue to rise. In this context, declining real rates will support gold prices into the $1800s.” 
 

XAU/USD key levels to watch