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  • Renewed USD selling bias assisted gold to attract some dip-buying on Tuesday.
  • COVID-19 jitters provided an additional boost to the safe-haven precious metal.
  • The underlying bullish tone in the markets might cap gains for the commodity.

Gold edged higher during the early European session and climbed to near one-month tops, around the $1948-50 region in the last hour.

A combination of supporting factors helped limit a modest intraday pullback, rather assisted the precious metal to attract some dip-buying near the $1934 region on Tuesday. The emergence of some fresh selling around the US dollar was seen as one of the key factors that benefitted the dollar-denominated commodity.

Apart from this, concerns about the continuous surge in new COVID-19 cases and uncertainty about a US runoff election in the state of Georgia extended some additional support to the safe-haven XAU/USD. Apart from this, the likelihood of more US fiscal stimulus further drove some flows towards the non-yielding yellow metal.

That said, the underlying bullish tone in the global financial markets might keep a lid on any runaway rally for the XAU/USD, at least for the time being. Investors have been betting on a strong economic recovery in 2021 amid the recent optimism over the rollout of vaccines for the highly contagious coronavirus disease.

From a technical perspective, any subsequent positive move is likely to confront some resistance near November daily closing highs, around the $1950 region. This makes it prudent to wait for some follow-through buying beyond the mentioned barrier before traders start positioning for an extension of the recent bullish momentum.

Market participants now look forward to the US economic docket, highlighting the release of ISM Manufacturing PMI, which might influence the USD price dynamics. Traders might further take cues from developments surrounding the coronavirus saga and the broader market risk sentiment to grab some short-term opportunities.

Technical levels to watch