Gold firms for second straight day on safe-haven buying

Gold rose for a second straight session on Monday as signs of economic slowdown in the world's second largest economy, China, lifted the safe-haven appeal of the precious metal.

Gold has always been preferred over investment in other riskier asset classes during turbulent times and economic uncertainty. With concerns over global economic slowdown reemerging after the release of weaker economic data from China over the weekend, Gold climbed to a 5-day high level of $1284 on Monday.

Data released on Saturday showed Chinese industrial production showed a dismal growth of 6.0% as compared to 6.5% expected while retail sales figures for the month of April also disappointed by printing +10.1% y-o-y growth as against 10.6% forecasted. Adding to it was disappointment over the Fixed Asset Investment that declined to 10.5% vs 10.7% the prior month and 11.0% consensus estimates.

Moreover, risk-off trade witnessed across Asian equity markets and broad USD weakness also extended support bid tone for the yellow metal.

From technical perspective, the metal has rebounded after dropping to an important support confluence near $1256, comprising of 20-day SMA and 50% Fibonacci retracement level of $1207-$1303 up-swing. Hence, a follow through buying interest above $1280 might continue to support further bullish momentum in the near-term.

Technical levels to watch

On the immediate upside, bulls would be eyeing to conquer last week’s high level resistance near $1287, which if cleared decisively could be aiming for an immediate test of recent closing highs resistance near $1292. A clear break-through $1292-93 resistance might now provide the required momentum to assist the commodity back above $1300 handle and extend its near-term upward trajectory.

On the flip side, $1277 now seems to protect immediate downside, below which $1265 confluence support (20-day SMA and 38.2% Fibonacci retracement level) would be back on sight.