- A subdued USD demand assisted gold to attract some dip-buying on Wednesday.
- COVID-19 vaccine hopes, the upbeat market mood should cap any further gains.
Gold has managed to recover a major part of its early lost ground to weekly lows and was last seen trading with modest losses, just below the $1880 level.
The precious metal extended this week’s rejection slide from the $1900 neighbourhood and witnessed some selling through the first half of the trading action on Wednesday. The latest optimism about promising COVID-19 vaccine trial results, along with a goodish rebound in the equity markets undermined demand for traditional safe-haven assets, including gold.
The XAU/USD dropped to multi-day lows, around the $1863 region, though lacked any strong follow-through selling, instead attracted some dip-buying at lower levels. Concerns about the economic fallout from new coronavirus restrictions in several US states kept the US dollar bulls on the defensive and extended some support to the dollar-denominated commodity.
The USD failed to gain any respite from Wednesday’s mixed US housing market data – Building Permits and Housing Starts. That said, a goodish rebound in the US Treasury bond yields extended some support to the greenback and might keep a lid on any meaningful upside for the non-yielding yellow metal. This, in turn, warrants some caution before placing fresh bullish bets.
Even from a technical perspective, the intraday downfall confirmed a near-term breakdown through a bearish flag chart pattern. Hence, any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. This should cap the upside for the XAU/USD near the $1900 pivotal point.
Technical levels to watch
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