Gold Price Analysis: XAU/USD bounces off lows, still in the red around $1860 region

• The upbeat market mood prompted some profit-taking around the safe-haven gold.
• Hopes for more US fiscal stimulus undermined the USD and extended some support.

Gold maintained its offered tone through the mid-European session and dropped to fresh two-day lows, around the $1852-51 region in the last hour.

The precious metal on Wednesday witnessed a modest pullback from the $1875-80 congestion zone and for now, seems to have stalled its recent strong rebound from multi-month lows touched on November 30. The progress in combating the highly contagious coronavirus disease boosted investors’ confidence and drove flows away from traditional safe-haven assets.

The risk-on flow was further reinforced by a goodish pickup in the US Treasury bond yields, which, in turn, prompted some profit-taking around the non-yielding yellow metal. That said, prospects for more US fiscal stimulus dragged the US dollar to a two-and-a-half-year low and extended some support to the dollar-denominated commodity, at least for now.

The US Treasury Secretary Steven Mnuchin on Tuesday proposed a relief package of $916 billion to House of Representatives Speaker Nancy Pelosi. Leading Democrat and Republican lawmakers deemed this as a positive development and raised hopes for a real breakthrough in the ongoing stimulus talks. Hence, the key focus will remain on the US stimulus headlines.

The XAU/USD was last seen trading near the $1860 region and remains at the mercy of the broader market risk sentiment amid absent relevant market moving economic releases. Apart from this, the USD price dynamics will also play a dominant role in influencing the price action and assist traders to grab some meaningful opportunities.

Technical levels to watch