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  • Gold prices mark corrective pullback from June 2020 lows tested on Friday.
  • US FDA’s approval to J&J’s one-shot vaccine, chatters over UK/US fiscal relief measures favor short-term buyers.
  • S&P 500 Futures snap two-day downtrend with 0.50% intraday gains, US 10-year Treasury yields halt further downside.
  • Month-start PMIs, stimulus news and yields are the key catalysts.

Gold consolidates Friday’s heavy losses, the biggest in a month, while picking up bids near $1,735-40 during the initial Asian session on Monday. The yellow metal dropped to a fresh low since June 2020 as the US dollar regained its strength. It should, however, be noted that the weekend developments gave fresh life to the risk barometers and seem to favor the bullion’s latest moves.

Are risk-on moves suggesting march in March?

The US Food and Drug Administration (FDA) approved Johnson and Johnson’s one-shot coronavirus (COVID-19) vaccines for emergency use during the weekend. The vaccine news gains extra attention as it also has an above 90% effective rate and the US is up for distributing 3.9 million doses in the week.

Also on the risk-positive side are the news suggesting UK Chancellor Rishi Sunak’s readiness to help the British businesses with nearly five billion pounds worth of another stimulus in this week’s budget. During the last week, the US policymakers pushed President Joe Biden’s $1.9 trillion covid stimulus through the House to the Senate.

On the contrary, downbeat PMIs from China and New Zealand’s fresh lockdown are minor negatives that couldn’t derail investor sentiment in the early hours of trading.

Against this backdrop, S&P 500 Futures gain 0.57% while the US 10-year Treasury yields manage to avoid further downside after Friday’s U-turn from the one-year top. It’s worth mentioning that the US dollar index (DXY) marked the heaviest run-up since May 2020 the previous day and weighed on the greenback.

Looking forward, gold traders will keep their eyes on the risk factors like stimulus and vaccines, coupled with China’s Caixin Manufacturing PMI, for fresh direction. Meanwhile, the US dollar moves and the Treasury yields are crucial to observe.

Technical analysis

Unless bouncing back beyond the November 2020 lows near $1,765, gold prices are likely declining towards a descending trend line support from August 2020, currently around $1,683.

 

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