- Gold regained some positive traction on Tuesday and recovered a part of the overnight slump.
- A pullback in the equity markets and the US bond yields extended some support to the metal.
- A subdued USD demand remained supportive, though vaccine optimism might cap the upside.
Gold edged higher through the first half of the trading action and was last seen trading near the top end of its daily range, just below the $1890 level.
A combination of supporting factors assisted the precious metal to regain some positive traction on Tuesday and recover a part of the previous session’s slump to over one-month lows. A promising development in late-stage COVID-19 vaccine trials boosted investors’ confidence and weighed heavily on traditional safe-haven assets, including gold.
In fact, pharmaceutical giant Pfizer announced on Monday that its experimental vaccine – co-developed with BioNTech – was more than 90% effective in preventing COVID-19. Moreover, the risk-on rally triggered a massive upsurge in the US Treasury bond yields, which further collaborated towards driving flows away from the non-yielding yellow metal.
Investors, however, remain sceptic about the efficacy and the length of immunity provided by the vaccine. The nervousness was evident from a modest pullback in the equity markets and a fresh leg down in the US bond yields. This, in turn, was seen as one of the key factors that benefitted the safe-haven XAU/USD and remained supportive.
Apart from this, a subdued US dollar price action extended some additional support to the dollar-denominated commodity. As investors digested Joe Biden’s victory in the US presidential election, the possibility of a split Congress dampened prospects for large stimulus packages and has been fueling speculations about further easing by the Fed.
That said, a major breakthrough in the fight against the highly contagious coronavirus diseases might have revived hopes for a swift global economic recovery and might keep a lid on any strong gains for the XAU/USD. This makes it prudent to wait for some follow-through buying beyond the $1900 mark before positioning for any further appreciating move.
Technical levels to watch
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