Building on Friday’s momentum, gold prices are starting the week on a strong note and are pushing back to within striking distance of critical resistance at $1,800 an ounce.

August gold futures last traded at $1,771.70 an ounce, up 1% on the day. According to market analysts, gold is getting a boost Sunday evening as investors start to question the health of the global economic recovery as the COVID-19 pandemic continues to spread unchecked, particularly in the U.S.

Whether trading large contracts (SPX®) or mini (XSP℠), S&P 500® Index Options let you to trade short or long and adapt quickly to changing market conditions. Learn more at URL

“While social distancing during March and April helped slow the spread, re-opening activities in a number of states – most notably Arizona, Alabama, Arkansas, South Carolina, North Carolina, Florida and Texas – have coincided with a wave of infections that may be spreading further south and west relative to the early affected states. In that sense, the recent increase in cases represents a “rolling,” as opposed to a second, wave of COVID-19 in the U.S.,” said economists from Nomura in a report late Friday.

However, although bullish sentiment is strong in the gold market, some analysts are warning that the precious metal might not have enough steam to break through its months-long trading range.

Marc Chandler, chief market strategist with Bannockburn Global Forex, warned that momentum indicators show that investors should use caution at current levels. He noted that in the 2008 Financial Crisis, gold didn’t break out to new highs until the fourth quarter of 2009.

“Recall in mid-May, gold pushed to $1765 and reversed lower. The MACD is neutral, and the Slow Stochastic looks poised to turn lower. That said, many are looking for a move to $1800,” he said in a research note Sunday.

Chris Weston, head of research at Pepperstone, also highlighted neutral sentiment and positioning in the gold market; however, he added that the precious metal is back on investor’s radar after prices pushed back above $1,750 an ounce.

Daniel Dubrovsky, analyst at DailyFX.com, said that although gold is testing the top of its range, it needs a new catalyst to breakout. He added that weaker equity markets could spark a new uptrend for the precious metal.

A major risk event he said he is watching this week is the International Monetary Fund’s updated forecast to be released Wednesday.

“The International Monetary Fund is going to update 2020 growth prospects ahead and those may paint a still-dismal picture,” Dubrovsky said in a report Saturday. “Absent a shock that sinks equities, it seems that gold prices could continue to struggle in directionless trade.”

Currency analysts at Brown Brothers Harriman said that there are expectations for the IMF to lower their growth forecasts to be more in line with recent projections from the Organisation for Economic Co-operation and Development, which sees the global economy contracting by around 6% this year.

Gold’s technical picture is not its only headwind as it tests long-term resistance below $1,800 an ounce. Analysts note that the precious metal is entering its seasonally slow period.

In a recent interview with Kitco News, Jeff Clark, senior precious metals analyst at Goldsilver.com, said that although he is bullish on gold long-term, he wouldn’t be surprised to see lower prices in July and August.

He added that any drop in gold should be seen as a buying opportunity.

“September is generally the best performing month of the year for both metals,” he said. “So, I would definitely want my exposure before then.”