Risk aversion is likely to prevail early this week
If the price jumps over $2,000, this would be a confirmation of the “bullish” trend
The House of Representatives passed a $2.2 trillion coronavirus relief bill in an internal party vote
Gold prices have risen from $1848 to $1915 this trading week, and the current price is around $1898. Concerns about sluggish economic growth amid the ongoing pandemic continue to dominate financial markets.
Fundamental Analysis: Risk Aversion is likely to prevail at the beginning of the week
Gold trading continues to be on an upward trend and it is expected that investors trading gold will be more active in the coming days. The U.S. stock market is under pressure from the news that U.S. President Donald Trump has signed the COVID-19 treaty, as well as data indicating a slowdown in the recovery of the struggling U.S. labor market.
According to the official announcement, the U.S. created 661,000 new jobs in September, much more than the expected 850,000. Risk aversion is likely to prevail earlier in the week, which is positive for gold.
Gold is considered a safe haven and the price of gold has risen in the wake of the coronavirus crisis as investors look for safer places to invest their money. According to some analysts, gold is currently overbought, and public sentiment towards this precious metal has become greedy and euphoric.
Nevertheless, the scenario for the gold price could be even better, as the “pigeon-eyed” decision of the US Federal Reserve continued to put pressure on the US dollar. The gold price is also supported by the news that the House of Representatives has passed a $2.2 trillion coronavirus relief bill in an internal party vote.
The former CEO of Goldman Sachs, Lloyd Blankfein, also said that the US dollar will continue to depreciate and the price of gold will rise even more. The gold price may be ready to rise higher in October as the Federal Reserve has announced that it will keep interest rates low for a longer period of time to support the economic recovery.
Technical analysis: Gold price is very close to current resistance levels
This precious metal has risen in this trading week and the current price is around $1898.
Data source: tradingview.com
If we take a look at the chart above (period of one year), we can see that the price of this precious metal rose from $1,445 to $2,075 and then began to fall. The current resistance levels are $1,900, $2,000 and $2,100, $1,850 and $1,800 represent the current support levels.
If the price jumps above $2,000, it would be a signal to buy gold and we have an open path to $2,100. A rise above $2,100 supports the continuation of the uptrend and the next price target could be around $2,300.
On the other hand, if the price falls below $1,800, this would be a strong “sell” signal and we have the open path to $1,700.
Summary
The gold price is supported by uncertainty about the future of the global economy, and during downturns and financial crises, safe-haven investments generally perform well. Risk aversion is likely to prevail at the beginning of the week, which is positive for the gold price. Gold is currently overbought, but as long as the gold price remains above $1,800, this precious metal is in the “buy” zone. If the price jumps above $2,000, this would confirm the “bullish” trend and open the way to $2,050 or even $2,100.
