Gold has continued to rise of late as a resurgence of coronavirus cases, particularly in the U.S., has dented some of the investor optimism about the speed of a post-pandemic recovery.
Spot gold edged up slightly to $1,763 per troy ounce by Thursday afternoon in the European trading day, down from the $1,779.06 touched early on Wednesday, its highest since early October 2012.
However, the precious metal is up by around 16% since the start of the year, and analysts see the broad rally continuing as uncertainty abounds over the virus and reemerging global trade tensions.
Bank of America Chief Global FICC Technical Strategist Paul Ciana said the uptrend in gold prices is set to test the 2012 highs of $1,790-1,805/oz in the next week. Should it break through expected resistance at $1,800, bullion will then set its sights on the all-time high of $1,920.70 made in 2011, Ciana said in a note Wednesday.
"The breakout occurring now that is ending Q2 completes an eight week trading range that has resumed higher," Ciana explained.
"The range breakout targets 1900 while the head and shoulders continuation confirmed in April targets 1947. These patterns say gold can make a new all-time high in the (second half of 2020) with Q3 on our mind."
Ciana suggested that a wave leading gold prices into the $2,000s is already underway, with an upside scenario of $2,114-$2,296.
The U.S. reported a record daily rise in new coronavirus cases on Wednesday, with 45,557 diagnoses, after states reopened their economies in recent weeks.
Compounding fears over a global resurgence of the virus is a flare up of international trade tensions. A notice from the U.S. Trade Representative Tuesday evening revealed that the Trump administration is considering new tariffs of up to 100% on $3.1 billion exports from France, Germany, Spain and the U.K.
The White House has also continued to adopt an adversarial tone toward China, with trade advisor Peter Navarro earlier this week walking back comments in which he suggested that the U.S.-China trade deal was "over."
"A sentiment dip remains a risk but with U.S. rates pinned to the ZLB (zero lower bound), Covid-19 reopen risks, trade rhetoric returning and U.S. elections around the corner, we'd prefer to see sentiment much more bullish after risks dissipate to consider being a contrarian," Ciana said.
HYCM Chief Currency Analyst Giles Coghlan told CNBC on Thursday that private banks have been encouraging their high net worth clients to allocate gold into their portfolio, which "infers that not everyone is confident we have entered a post-pandemic market recovery."
Coghlan suggested that fears of a second spike in infections could drive major indexes back into bear market territory, and that a volatile few weeks of trading lie ahead.
"Over the medium-term gold should rise alongside silver, but recent gains may be limited by a correction," he said.
Coghlan acknowledged that any heavy selling in the equity markets could lead to near term gold weakness, but suggested that the $1,680 region for XAU/USD "should provide good support for buyers to resume their longs."