Gold hold the fort in the $1,720s as risk appetite deteriorates

• Gold prices jump to fresh seven-year highs and hold the fort in the 1720s in Asia.
• USD/JPY moving to fresh lows, supporting gold higher as US dollar slides. 

The US dollar was soft on Monday and with the uncertainty pertaining to COVID-19, gold was able to leap through prior resistance, supported in the $1,680 and then moving through the low $1,700s. The global stimulus is keeping the yellow metal elevated, reacting also to the US dollar’s ebbs and flows. 

In the US session, Gold for June delivery on Comex added $8.60, or 0.5%, to settle at $1,761.40 an ounce making for the highest finish for a most-active contract since Oct. 11, 2012. The move on Monday toppled Thursday’s seven-year high, falling more in line with US stock markets with both the S&P 500 and DJIA falling into negative territory on Monday.  In Asia, the USD/JPY pair is sliding to fresh lows which will bode well for gold bulls. At the time of writing, USD/JPY is trading at 107.54 between a range of 107.53 and 107.76.

A set-up for a multi-year bull market

“The Fed’s massive QE program has historically been associated with a suppression of real rates, and while it is still too early to say if we have entered the recovery phase just yet, with the risk of another containment induced deflationary shock still elevated, the recent price action has done well to firm upside momentum signals,” analysts at TD Securities explained. 

“Looking forward, we continue to see a set-up for a multi-year bull market being cemented, as the market is flooded with monetary and fiscal stimulus, while Fed rates are at the zero bound, which suggests investors will continue to seek gold’s warm embrace as real global rates become entrenched in negative territory.”

Gold levels