Gold resting around 7-year highs and made a  78.6% retracement

• Spot gold is in 7-year highs and approaching its next resistance at $1,750.
• Despite a bid in stocks, gold and precious metals was rising.

Spot gold is trading at $1725 having travelled from a low of $1,709 to a high of $1,747.72 and up +0.76%at the time of writing as the safe haven picks up a bid due to the concerns about weakness in the global economy. While the stock markets performed on Tuesday, as well as in corporate quarterly results were disappointing and likely supporting the rush to gold. Some weakness in the US dollar also provided a lift to bullion, with the DX losing traction below the 99 handle and on the approach to the 98.80. This will be a high volume location around the 50% mean reversion point of the March rally. 

Meanwhile, Gold for June delivery on Comex added $7.50, or 0.4%, to settle at $1,768.90 an ounce but made an intraday peak at $1,788.80. These levels were the best levels since October 2012. The rise in gold also comes down to the amount of stimulus being pumped into the global economy along with the Federal Reserve’s expanded lending and asset purchasing program announced last week, announcing $2.3 trillion in support of the US economy. 

“The Fed’s massive QE program and the fiscal impulse could see long-end rates rise during the recovery phase, but not without rising inflation expectations, which should keep real rates suppressed.,” analysts at TD Securities explained.

“In this context, we suspect that investment demand for gold will continue to rise as capital seeks shelter from a long-term environment in which real rates are negative. Further, following the relentless ‘dash-for-cash’, gold’s positioning remains far cleaner, and key triggers for CTA flow remain distant, suggesting the left tail for gold has now shrunk. Silver and platinum could see some marginal algo short-covering, but we don’t expect any significant flows from trend-followers.”

Gold levels

Gold is in 7-year highs and made a 78.6% retracement of the move down from 2011 to 2005. “The 1734/35 zone guards the 1792/1803 highs (October 2012 and November 2011 highs). These are considered to be the last defence for the 1921.50September 2011 high. A longer-term positive bias will be preserved while above the 1474/1445 supports,” analysts at Commerzbank explained.