Gold: Limited Upside Slope

Summary

• Gold prices have been in a recovery mode these days as market sentiment remains unstable amid some conflicting signals from geopolitics and economy.
• Dismal economic data from Germany pointed to a rising recession risk and spurred risk aversion across nearly across the board overnight.
• Technically, the prices need to stay above the $1,500 support in order not to lose the bullish momentum.

  Gold prices have been in a recovery mode these days as market sentiment remains unstable amid some conflicting signals from geopolitics and economy. The bullion struggled to overcome the $1,525 area yesterday but managed to stay above the $1,500 handle and shows a limited bearish bias early on Tuesday.

  Dismal economic data from Germany pointed to a rising recession risk and spurred risk aversion across nearly across the board overnight. Further negative news from this front could add to the negative sentiment in risky assets as market concerns are increasing that the world may face a global economic slowdown some time later, with central banks’ shift to a dovish rhetoric confirms this threat. In this context, further negative signals from the economy could fuel demand for safe-haven precious metal in the medium term.

  Meanwhile, in the near term, the upside may be limited for the bullion due to some signs of a progress in the US-China trade talks that are set to resume in early October. In particular, China has granted new waivers to some domestic state and private firms exempting them from retaliatory tariffs on soybeans imported from the US. Investors may assess this decision as a step towards a deal, which should limit the upside potential for gold at this stage. Technically, the prices need to stay above the $1,500 support in order not to lose the bullish momentum.