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  • A strong pickup in the USD demand exerted some heavy downward pressure on gold.
  • The downside remains cushioned amid a fresh wave of the global risk-aversion trade.
  • Market participants now look forward to the US economic releases for a fresh impetus.

Gold refreshed daily lows, around the $1708-07 region in the last hour, albeit lacked any follow-through and quickly bounced back to the $1715 region.

The commodity extended the previous day’s intraday retracement slide from the vicinity of the $1750 region, or multi-year tops and witnessed some selling on Wednesday, snapping three consecutive days of winning streak.

Market worries over an imminent global recession resurfaced after the IMF on Tuesday said that the COVID-19 pandemic could cause the world economy to shrink by 3% in 2020, the biggest collapse since the Great Depression.

This eventually provided a strong boost to the US dollar’s status as the global reserve currency and prompted some long-unwinding trade around the dollar-denominated commodity. However, a combination of factors helped limit deeper losses.

The global risk sentiment took a hit amid mounting concerns over the economic fallout from the coronavirus pandemic. This was evident from a fresh leg down in the equity markets and underpinned the precious metal’s safe-haven demand.

The coupled with expectations of a prolonged period of low/negative interest rates and aggressive stimulus measures might extend some additional support to the non-yielding yellow metal and help limit the downside, at least for the time being.

Hence, it will be prudent to wait for some strong follow-through selling before confirming that the commodity might have already topped out in the near-term and positioning for an extension of the ongoing corrective slide.

Moving ahead, Wednesday’s release of monthly retail sales data and industrial production figures from the US will provide fresh clues about the economic damage caused by the COVID-19-induced lockdowns and produce some meaningful trading opportunities.

Technical levels to watch