Gold prices tumbled after the German ZEW survey showed a surprise dose of optimism is brewing for the eurozone’s largest economy. The expectations survey came in at 25.2, much higher than the consensus estimate of -42 and a strong improvement from the prior -49.5 reading. If Germany is turning corner sooner than many are expected, that will provide a major speed bump in gold’s run to record territory. The path is still likely to be higher for gold , but continued optimism that the rest of Europe is turning the corner could derail a quick return to back above the $1700 level.
The surprise upbeat German outlook has financial markets starting to see light at the end of the long tunnel, but a long recovery is still the base case for Germany, with GDP remaining negative until the third quarter. The survey also noted that they don’t’ expect a return to pre-coronavirus levels before 2022.
If downside pressure persists, gold will find major support from the $1630 to $1650 region.