Gold Price Analysis: Settles $10 below seven-year tops, books best week in three

• Gold hit fresh multi-year highs amid increased safe-haven demand.
• Deeper economic contraction, US-China trade tensions underpinned.
• USD slipped on mixed US macro data, focus shifts to Powell’s testimony.

Gold prices (XAU/USD) rallied over 1% on Friday while settled the week nearly 3% higher, registering the best week in three.

The yellow metal put up a great show in the past week and reached the highest level since November 2012 at 1751.80, as gold’s safe-haven appeal was bolstered by intensifying US-China trade tensions.

The Trump administration accused China of mishandling the coronavirus outbreak and the conflict between the two superpowers escalated after US President Trump said Thursday, he could cut ties with Beijing.                 

Meanwhile, deepening global economic contraction, in the face of the pandemic, prompted investors to run for cover in the traditional safe-haven.

The German and Eurozone economic output contracted in Q1 while the US Retail Sales slumped by a record of 16.4% in April. These macro news added to concerns over the bleak global economic outlook and, in turn, drove the bullion through the roof while the US dollar wilted on poor US economic data.

From a broader perspective, the massive monetary and fiscal stimulus deployed globally to fight the unprecedented virus impact will continue to benefit gold, which is usually considered hedge-against inflation and currency debasement.

In the week ahead, all eyes will remain on the US Federal Reserve (US) Chairman Jerome Powell’s testimony on Coronavirus Aid, Relief, and the Economic Security Act before the Senate Banking, Housing, and Urban Affairs Committee in Washington DC.

In his speech last Wednesday, Powell downplayed the odds of negative interest rates, which temporarily dragged the prices lower. However, the recent consolidation of the rally above 1700 mark suggested, the precious metal was primed for a test of fresh multi-year highs.

Gold: Technical levels to watch

Gold prices closed the week at 1742.22. The next resistances are aligned at 1754.39 (Nov 2012 high) and 1760 (round number). To the downside, immediate support is seen at 1728.67 (May 15 low). A break below which the 1700 mark will be tested.

Gold: Additional levels