- Gold met with some fresh supply at higher levels and drifts back into the negative territory.
- Optimism around promising vaccine trials undermined the commodity’s safe-haven demand.
- A softer tone surrounding the USD might help limit deeper losses, warranting caution for bears.
Gold failed to capitalize on its intraday uptick to the $1885 region and has now drifted back into the negative territory for the second straight session. The commodity was last seen hovering near the lower end of its daily trading range, just above the $1875 level.
Growing market worries about the economic fallout from the imposition of new COVID-19 restrictions in several US states kept the US dollar bulls on the defensive through the first half of the trading action on Thursday. This, in turn, was seen as one of the key factors that provided a minor lift to the dollar-denominated commodity.
The supporting factor, to a larger extent, was offset by the latest optimism over a potential vaccine for the highly contagious coronavirus disease. This, along with a goodish rebound in the US equity futures, undermined the precious metal’s safe-haven status and kept a lid on any further gains, rather prompted some selling at higher levels.
Despite the two-way moves, the XAU/USD remains well within a familiar trading range and thus, warrants some caution before placing fresh directional bets. From a technical perspective, the recent price action has been confined in an upward sloping channel, which constitutes the formation of a bearish continuation flag pattern on short-term charts.
That said, it will still be prudent to wait for some follow-through selling below the channel support, currently near the $1870 region, to confirm a near-term bearish breakdown. The XAU/USD might then accelerate the fall back towards challenging strong horizontal support near the $1850-48 region.
Market participants now look forward to the US economic docket – featuring the releases of Building Permits and Housing Starts – for a fresh impetus later during the early North American session. The data, along with developments surrounding the coronavirus saga and the broader market risk sentiment, might produce some short-term trading opportunities around the XAU/USD.
Technical levels to watch
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