- Gold witnessed some aggressive long-unwinding trade on Monday amid upbeat market mood.
- The optimism over a potential COVID-19 vaccine provided a strong boost to the risk sentiment.
- Technical selling below the $1930-25 resistance-turned-support aggravated the bearish pressure.
Gold extended its sharp intraday retracement slide from seven-week tops and weakened further below the $1900 mark during the early North American session. The commodity was last seen hovering around the $1875 region, or one-week lows, down nearly 4% for the day.
The precious metal witnessed a dramatic turnaround from the $1965-66 region, or the highest level since mid-September in reaction to the latest optimism over a potential vaccine for the highly contagious coronavirus disease. In a promising development, pharmaceutical giant Pfizer announced this Monday that its experimental vaccine was more than 90% effective in preventing COVID-19.
This was seen as a major victory in the fight against the pandemic and provided a strong boost to the already upbeat market mood. This was evident from a rally of nearly 5% in the S&P 500 futures, which, in turn, was seen as one of the key factors that prompted some aggressive long-unwinding trade around the safe-haven precious metal.
The risk-on environment was reinforced by a huge spike in the US Treasury bond yields, which further drove flows away from the non-yielding yellow metal. Apart from this, a modest US dollar rebound and the possibility of some short-term trading stops being triggered below a previous strong resistance, now turned support near the $1930-region, further aggravated the bearish pressure surrounding the dollar-denominated commodity.
There isn’t any major market-moving economic data due for release from the US on Monday. Hence, it will now be interesting to see if the XAU/USD is able to find any support at lower levels or the sharp intraday pullback and a subsequent slide below the $1900 mark continues to lure bearish traders. Nevertheless, the commodity is now headed back towards the $1865-60 support zone, which if broken should pave the way for additional weakness.
Technical levels to watch
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