Gold prices finished last week on the offensive, though closed in the red. The metal managed to stay above the $1,300 level during the pullback from highs. The main catalyst behind the bearish correction was strength of the dollar that appreciated nearly across the board. Meanwhile, some overbought conditions added to the selling pressure.
However, the uptrend from mid-November remains intact, and the correction from late January could come to a conclusion as soon as dollar demand begins to abate. As the market focus is on the global growth outlook which is worsening, the safe-haven gold demand will likely persist on broader terms. But in the short term, the bullish attempts will likely be limited due to the remaining dollar demand.
Technically, the key on the downside is still the $1,300 level as a break below will result in a cloudier outlook. As long as the precious metal holds above the psychological level, there is a scope for a recovery towards $1,320 and higher.
This week, investors will focus on the next round of US-China trade talks. Failure to make a significant progress towards a deal will fuel risk aversion and could support the bullion, while the threat of another US government shutdown after a February 15 deadline could hurt the dollar and thus lift the yellow metal more substantially.
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