Gold is up by just over 1% today, touching a session high $1,663.62
Gold has had a choppy last few sessions, as it finds itself caught up amid the mixed risk mood in the market recently. After the Monday surge, where equities and risk rallied, gold has found itself stuck around $1,640 to $1,670 for the most part.
There are a lot of moving parts associated to gold right now and among them are dollar sentiment, a replenish in hedging bets amid the risk rally (?), the rise in government debt/deficits recently, and the toss up of low inflation expectations.
There are just so many things to consider right now but if anything else, I'd argue that the first two may have more to do with gold flows over the past week or so.
I'm still on the camp that the long-term prospects of gold remains relatively attractive. The only thing that is likely to derail any massive gold surge in the big picture is low inflation expectations, which is likely to persist for a very long time after the crisis.
But I reckon that such a focus will only come when the dust begins to settle and we look towards the more permanent damage caused by the virus outbreak. For now, we are still in the "war" and the focus remains more on flows rather than anything else.
For gold buyers, the key is to try and secure a daily break above the recent highs at $1,669.54 and $1,679.68. Upon that break, it will open up the path towards testing $1,700.
As such, there is more work to do. Otherwise, the recent rally we're seeing isn't really going to amount to much without any firmer technical breaks.
The risk for buyers can be seen closer to $1,640 with the 100-hour moving average resting at $1,643.48 currently. A break below that will see the near-term bias turn more neutral and gold will lose some of its recent upside momentum instead.
Most of the damage done to gold over the past month has been due to liquidation trades and a rush to the dollar. For now, that seems to be put behind us amid central bank and government measures to calm the market.
However, as the economic damage persists, it is hard to say that this is the end of that episode for the dollar and for gold over the coming weeks/months.
That will be a key risk to consider moving forward but in the bigger picture, any real dip in gold will present yet another good opportunity to scale in again in my view.
