Gold continued its upward movement Monday morning, hitting a record high amid fears of a weaker dollar and rising geopolitical risks following the closure of the US consulate in Chengdu.
Demand for the precious metal rose sharply after the dollar fell to its lowest level since September 2018. The worsening epidemiological situation in the United States lowers investor expectations regarding the possibility of a quick recovery in the world's largest economy. Many experts say that following the results of the two-day FOMC meeting, which will be held this week, the regulator may reduce forecasts for the prospects for the US economy. Low interest rates and an aggressive asset repurchase program will only increase the pressure on the US dollar in the medium to long term.
The market's focus is also set on a new diplomatic conflict between the US and China, which increases geopolitical risks and pushes traders to invest in gold. Both countries have closed each other's consulates in Houston and Chengdu amid allegations of espionage that the White House launched in the middle of last week. A new round of tensions between the countries could lead to the cancellation of the interim trade agreement and a deterioration in the situation in international trade, which so far cannot recover from the shock caused by the pandemic.
Today, in the economic calendar, it is worth paying attention to the publication of indices for Germany from the IFO Institute and a report on orders for durable goods in the United States.
The fundamental background for gold remains positive, but the prospects for further growth in quotations remain uncertain, as many investors may start fixing long positions after the renewal of the historic high. This can lead to the development of a fairly strong recoil movement.
A strong bullish trend continues to develop on the chart. During the day, we are expecting a renewal of the maximum established today at the level of 1945.00, after which a pullback movement may follow.
Resistance levels: 1940.00, 1950.00, 1970.00;
Support levels: 1931.00, 1915.00, 1900.00.
The main scenario - an increase above 1945.00 and a rollback down.
An alternative scenario - a decline in quotes from current levels.
The current fundamental background is positive. We are out of the market. Opening long positions at the current price is quite dangerous. The likelihood of a rollback movement is high. There are no good sell signals yet.
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