- Gold attracted some dip-buying during the early North American session and rallied to two-week tops.
- A combination of factors might hold bulls from placing aggressive bets and cap gains for the metal.
Gold reversed a knee-jerk fall witnessed during the early North American session and shot to two-week tops, around the $1863-64 region in the last hour.
The precious metal attracted some dip-buying near the $1832 region and is now looking to build on this week’s goodish rebound from the vicinity of the $1800 mark, or eight-week lows touched on Monday. The strong move up over the past hour or so lacked any obvious catalyst and runs the risk of fizzling out rather quickly.
The prevalent upbeat market mood – as depicted by a positive trading sentiment around the global equity markets – might hold investors from placing aggressive bullish bets around the safe-haven XAU/USD. The global risk sentiment remained well supported by the optimism over the rollout of vaccines for the highly contagious coronavirus disease and hopes for additional US fiscal stimulus measures under Joe Biden’s presidency.
The market expectations for more aggressive fiscal spending in 2021 were further lifted by comments from US Treasury Secretary nominee Janet Yellen. At her confirmation hearing, Yellen urged lawmakers to act big on COVID-19 relief package and not to worry too much about debt burden.
Meanwhile, the risk-on environment, combined with the likelihood of a larger government borrowing provided a modest lift to the US Treasury bond yields. This was seen extending some support to the US dollar, which might further keep a lid on any meaningful upside for the dollar-denominated commodity, at least for the time being.
Hence, it will be prudent to wait for some follow-through buying beyond the last week’s swing highs, around the $1865 region, before positioning for any further near-term appreciating move.
Technical levels to watch
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