Gold Price Analysis: XAU/USD pares majority of early gains, holds above $1,770

• XAU/USD reversed its direction after renewing multi-year highs. 
• Risk aversion helps gold limit its losses for the time being.
• USD continues to gather strength against its major rivals on Wednesday.

After closing the last three trading days in the positive territory, the XAU/USD pair preserved its bullish momentum and touched its highest level since September 2012 near $1,779. However, with the greenback capitalizing on risk-aversion, the pair reversed its direction and erased the majority of its daily gains. As of writing, the troy ounce of the precious metal was trading at $1,773, still up 0.3% on a daily basis.

Eyes on Wall Street

Heightened worries over a dismal global economic recovery outlook amid an increasing number of coronavirus infections weigh on market sentiment on Wednesday. Moreover, escalating geopolitical tensions on reports claiming that the US is looking to impose tariffs on $3.1 billion worth of UK and EU imports is forcing investors to seek refuge.

Reflecting the risk-off market environment, major European equity indexes are down between 1.6% and 2% on Wednesday and the greenback is outperforming its rivals. The US Dollar Index was last seen gaining 0.28% on the day at 96.95. Nevertheless, gold’s safe-haven status is also helping it limit its losses. 

In the second half of the day, participants are likely to keep a close eye on Wall Street’s performance. If major equity indexes in the US fall sharply, the USD could encounter a fresh buying-wave and cause XAU/USD to continue to edge lower.

Technical levels to watch for