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  • Gold witnessed some heavy selling on Thursday amid a strong pickup in the USD demand.
  • Weakness below the $1890 horizontal support further aggravated the bearish pressure.
  • The stage seems set for a fall to retest September monthly lows, near the $1849-48 region.

Gold added to its intraday losses and dived to three-week lows, around the $1877-76 region during the early North American session.

The precious metal struggled to capitalize on the previous day’s modest uptick, instead met with some fresh supply near the top end of a three-day-old trading range. The sharp intraday fall was exclusively sponsored by a strong pickup in the US dollar demand, which tends to undermine dollar-denominated commodities, including gold.

Given the alarming pace of growth in new coronavirus cases in Europe and the United States, investors now seem concerned that renewed lockdown measures could prove detrimental to the already fragile global economic recovery. This, in turn, was seen as a key factor that provided a strong boost to the greenback’s status as the global reserve currency.

The USD bulls largely shrugged off the uncertainty over the actual outcome of the US presidential election. It is worth reporting that national polls show Democrat rival Joe Biden has a lead over Republican incumbent President Donald Trump. Investors, however, remain wary on the back of a narrow gap in certain key swing states.

This, along with the lack of progress in the US stimulus talks dampened the market mood. This was evident from a steep decline in the equity markets. The anti-risk flow was reinforced by a fresh leg down in the US Treasury bond yields, albeit did little to revive the precious metal’s safe-haven demand or lend any support.

Apart from a broad-based USD strength, Wednesday’s downfall could further be attributed to some technical selling below the $1890 horizontal level. A subsequent breakthrough 100-day SMA support, around the $1886 region, for the first time since March might have already set the stage for an extension of the depreciating move.

There isn’t any major market-moving economic data due for release from the US on Wednesday. Hence, developments surrounding the coronavirus saga will continue to play a key role in influencing the USD price dynamics and produce some short-term opportunities. Nevertheless, the XAU/USD now seems vulnerable to slide further towards September monthly swing lows support near the $1849-48 region.

Technical levels to watch