Commodity Market: Gold trades below recent 91-month highs as promising early COVID-19 vaccine results spur investor optimism

Having touched a 91-month high on Monday, Gold prices on Tuesday remained under some pressure, stemming from improved investor risk appetite following news of promising COVID-19 experimental vaccine results in Moderna Inc’s (MRNA) early-stage trial.

However, the downside may be limited because of renewed trade frictions between Beijing and Washington and a wave of stimulus measures by central banks across the globe, aimed to mitigate the impact from the coronavirus pandemic on macroeconomic environment.

“Gold investors still see the opportunity on both sides of the coin right now because optimism from lockdowns is also inflationary,” Stephen Innes, chief market strategist at AxiCorp, said. “But the trade war itself is a huge risk as we saw through 2019, that was the primary driver for gold prices to go up,” he added.

At 8:34 GMT today Spot Gold was gaining 0.12% to $1,734.88 per troy ounce, after touching an intraday low of $1,726.62, or a price level not seen since May 14th ($1,711.27). Meanwhile, Gold futures for delivery in June were gaining 0.08% on the day to trade at $1,735.80 per troy ounce, while Silver futures for delivery in July were down 0.15% to trade at $17.442 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was retreating 0.06% on Tuesday to 99.56, after earlier touching 99.38, or a level not seen since May 11th (99.12).

Today investors will be looking for more clues on economic outlook during Federal Reserve Chair Jerome Powell’s testimony on Coronavirus Aid, Relief, and Economic Security Act before the Senate Banking, Housing, and Urban Affairs Committee at 14:00 GMT.

Additionally, at 18:00 GMT Boston Fed President Eric Rosengren will participate in a webinar focused on the impact of the COVID-19 public health crisis on the New England economy and Federal Reserve actions taken in response.

Meanwhile, near-term interest rate expectations were little changed. According to CME’s FedWatch Tool, as of May 19th, investors saw a 95.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting in June, compared with a 95.7% probability a day ago.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,741.85
R1 – $1,756.29
R2 – $1,779.70
R3 – $1,794.13
R4 – $1,808.57

S1 – $1,718.44
S2 – $1,704.00
S3 – $1,680.60
S4 – $1,657.19

The RSI and the MACD on the 1H chart highlight a potentially limited downside for Gold. Immediate support may be found in the area around today’s low of $1,726.62, while the 20-period EMA ($1,737.87) may restrict upside movement at first. Next, resistance may be expected at R1 pivot level ($1,756.29) and then, at the high from May 18th ($1,765.26).