- A combination of factors assisted the precious metal to regain some traction on Tuesday.
- The upbeat market mood might keep a lid on any runaway rally for the safe-haven metal.
- Investors look forward to testimony from Powell, Mnuchin for a fresh directional impetus.
Gold quickly reversed an early European session dip to the $1726-25 region and now seemed to head back towards the top end of its daily trading range. The commodity was last seen trading with modest daily gains, just above the $1735 level.
Following the previous day’s sharp intraday pullback from fresh multi-year tops, the commodity managed to regain some positive traction on Tuesday. The uptick was supported by worsening US-China relations, growing fears about the second wave of coronavirus infections and some follow-through US dollar weakness, which tends to benefit the dollar-denominated commodity.
However, the optimism over the re-opening of economies in some parts of the world and encouraging data on COVID-19 vaccine trial remained supportive of the prevalent risk-on environment. The upbeat market mood seemed to be the only factor capping gains for the safe-haven precious metal. The global risk sentiment got a strong boost after the US drugmaker Moderna announced positive results from a Phase 1 clinical trial for its coronavirus vaccine on Monday.
The negative factor, to a larger extent, was negated by expectations for additional stimulus by major central banks. Hence, Tuesday’s key focus will be on the Fed Chair Jerome Powell and the US Treasury Secretary Steven Mnuchin’s congressional testimony. The comments will provide clues about any fresh monetary/fiscal measures to combat COVID-19’s economic impact and help determine the next leg of a directional move for the non-yielding yellow metal.
In the meantime, the broader market risk sentiment and the USD price dynamics might play a key role in influencing the commodity’s momentum. Later during the early North American session, the US housing market data – Building Permits and Housing Starts – will also be looked upon for some short-term trading opportunities.
Technical levels to watch
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