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  • XAU/USD prices remain subdued below its 50DMA and the $1840 level, despite risk-off flows.
  • A pick up in the DXY to just under 91.00 seems to be keeping precious metal bulls at bay.

XAU/USD hit highs of the day and tested its 50-day moving average which sits just below $1843 in recent trade but was unable to break above. At present, the precious metal trades close to the $1840 mark and is marginally higher by about 0.2% or just under $3 on the day.

Gold prices struggle to find a bid despite risk-off market tone

Markets have adopted a somewhat risk-off mood on the final trading day of the week as concern regarding the lack of progress in Brexit and US fiscal stimulus negotiations begins to weigh on broader market sentiment, as well as a few negative vaccine production/distribution updates.

In terms of the latest on each of these topics, starting with Brexit; UK PM Boris Johnson has echoed the downbeat tone of his EU counterparts on the prospects for a deal to be reached, saying late on Thursday that there is a strong possibility we do not get a deal, a message he reiterated on Friday before adding that negotiations are still deadlocked ahead of the new de-facto Sunday deadline for a deal. However, the German Foreign Minister recently hinted that talks would be able to go past Sunday is needed, seemingly playing down the importance of this date.

On US stimulus talks; a breakthrough remains elusive and Senate Majority Leader Mitch McConnell last night dampened hopes for a deal by saying that he does not see a path to an agreement on the two main sticking points (aid for states and cities and liability protection). Meanwhile, the Senate will need to vote in favour of a one-week stopgap funding bill if it is to avert a US government shutdown from mid-night on Friday.

Finally, in terms of the latest vaccine news, while the FDA voted 17-4 that the benefits of taking the Pfizer vaccine outweigh the risks to over 16 year olds and panel will now consider whether to grant the vaccine emergency use authorisation (all as expected), Sanofi and GlaxoSmithKline announced that they had delayed their vaccine development programme in order to improve the immune response that the vaccine provokes in the elderly.

Given the above, stocks are lower in both Europe and the US, as are bond yields, while the US dollar has picked up a little and now trades just under the 91.00 level again. This mild pick up in USD seems to be the main factor preventing a broad risk-off-related rally in precious metals.

XAU/USD continues sideways within recent ranges, capped by 50DMA

XAU/USD prices continue to trade within recent ranges, with the price action seemingly capped around $1850 to the upside, or actually by the 50DMA at $1843 on Friday, while to the downside the price action is being supported in the $1820s.