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  • Gold extends corrective pullback from 8.5-month low to refresh weekly high.
  • US dollar weakness precedes the recently upbeat news from the US, the UK to favor bulls.
  • Cautious sentiment ahead of the key data/events, lack of major catalysts keeps traders guessing.

Gold prices extend the early-week recovery while picking up bids around $1,739 amid the initial Asian session on Wednesday. In doing so, the yellow metal stretches the bounce off the lowest since June 2020 to the weekly high near $1,740 before recently catching a breather.

Although risk catalysts are less supportive to the yellow metal off-late, the US dollar weakness could be traced to the commodity’s recent upside. That said, the US dollar index (DXY) took a U-turn from a one-month high towards snapping a three-day winning streak on Tuesday.

Checking the catalysts, the lack of major data/events and the market’s cautious sentiment ahead of the key speech from Fed Chair Jerome Powell, the UK budget and American employment figures for February could be spotted. Also challenging the mood could be the recent fears of the covid variant traced from Brazil.

It should, however, be noted comments relating to the coronavirus (COVID-19) vaccine from US President Joe Biden and strong hints for today’s British budget recently favored risks. Details suggest US President Biden preponed the earlier deadline to have vaccines for all of the American adults whereas the Financial Times (FT) teased extension of the furlough scheme to September during the UK budget.

Against this backdrop, S&P 500 Futures eyes recovery of the previous day’s Wall Street losses whereas the US 10-year Treasury yields signals reversal of the recent losses while staying above 1.41%.

Looking forward, gold traders will keep eye on the UK budget and updates on the US covid stimulus progress in the Senate ahead of Thursday’s speech from Powell, not to forget Friday’s US Nonfarm Payrolls (NFP). It’s worth mentioning that the Fedspeak recently tried to placate bond bears and may keep doing so while suggesting further recovery of the yellow metal.

Technical analysis

Despite bouncing off multi-day low, gold prices remain vulnerable to the further downside unless crossing November 2020 low around $1,765. On the downside, a falling trend line from August, at $1,680 now, will be the key to watch.


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