- A strong pickup in the USD demand prompted some fresh selling around gold on Wednesday.
- The US political uncertainty forced investors to hedge their positions and underpinned the USD.
Gold witnessed some fresh selling during the early European session and might now be headed back towards the lower end of its daily trading range.
Currently hovering around the $1890 region, a strong bid tone surrounding the US dollar was seen as one of the key factors exerting some pressure on the dollar-denominated commodity. Early results of the US election indicated that the race for the White House has turned out to be far tighter than expected.
Given that traders had bet on a clear cut victory for Democrat candidate Joe Biden, the outcome forced investors to hedge their positions and drove some aggressive flows towards the greenback. Moreover, reports indicated that there will be a delay in results from key battleground states – Wisconsin, Michigan and Pennsylvania.
Meanwhile, the latest comments by the incumbent President Donald Trump raised the possibility of a contested election and triggered a fresh wave of the global risk aversion trade. This was evident from a steep decline in the US equity markets, which, along with a slump in the US Treasury bond yields extended some support to the non-yielding yellow metal.
That said, a period of heightened uncertainty might continue to underpin the greenback. This, in turn, should keep a lid on any meaningful positive move for the XAU/USD, rather prompt some fresh selling at higher levels. Hence, a slide back towards the recent daily closing lows, around the $1860 region, remains a distinct possibility.
Technical levels to watch
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