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  • A combination of factors prompted some fresh selling around gold on Wednesday.
  • The prevalent risk-on mood was seen as a key factor that capped the early uptick.
  • A modest pickup in the US bond yields exerted some pressure on the commodity.

Gold struggled to capitalize on its intraday uptick and refreshed daily lows, around the $1835-34 region during the early European session.

The precious metal gained some positive traction during the first half of the trading action on Wednesday and moved away from over two-week lows, around the $1830 region set in the previous session. The uptick, however, lacked any strong follow-through and fizzled out rather quickly near the $1845 area.

The prevalent upbeat market mood was seen as one of the key factors that undermined the safe-haven XAU/USD and capped the upside. Apart from this, a pickup in the US Treasury bond yields – amid renewed optimism about a massive US fiscal stimulus measures – exerted some pressure on the non-yielding yellow metal.

The global risk sentiment got a lift after Democrats in the US Congress took the first steps toward advancing President Joe Biden’s proposed $1.9 trillion COVID-19 relief package. Democrats unlocked a legislative tool to bypass Republican and opened debate on a fiscal 2021 budget resolution with coronavirus aid spending instructions.

Further boosting investors’ confidence was reports that the Sputnik V coronavirus vaccine developed in Russia showed an effectiveness rate of 91.6% in the phase-3 trial. The developments lifted hopes for a strong global economic recovery and remained supportive of the risk-on flows, which, in turn, tends to weigh on traditional safe-haven assets.

Meanwhile, the ongoing rally in the US bond yields extended some support to the US dollar. This was seen as another factor that dented demand for the dollar-denominated commodity. A subsequent fall below the overnight swing lows, around the $1830 area, should pave the way for a further near-term depreciating move for the XAU/USD.

Market participants now look forward to the release of the US ISM Services PMI, which might influence the USD price dynamics and provide some impetus later during the early North American session. Traders might further take cues from the broader market risk sentiment, the US stimulus headlines and movement in the US bond yields.

Technical levels to watch