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  • A softer tone surrounding the USD assisted gold to gain some traction on Thursday.
  • COVID-19 vaccine optimism might cap the upside for the safe-haven precious metal.
  • Holiday-thinned liquidity warrants some caution before placing fresh directional bets.

Gold edged higher during the Asian session on Thursday and was last seen trading with modest daily gains, just above the $1810 level.

Following the previous day’s two-way/directionless price move, the precious metal managed to gain some positive traction amid a softer tone surrounding the US dollar. The incoming softer US macro releases added to worries about the economic fallout from the continuous surge in new coronavirus cases and dragged the USD to its lowest level in more than two months. This, in turn, was seen as one of the key factors lending some support to the dollar-denominated commodity.

According to the data released on Wednesday, the number of Americans filing for unemployment insurance unexpectedly jumped to 778K during the week that ended on November 20. The downbeat report suggests that imposition of new COVID-19 restrictions was undermining the labor market recovery. Adding to this, the minutes of the November 4-5 FOMC meeting further fueled speculations about additional monetary easing by the Fed in December and kept the USD bulls on the defensive.

The minutes revealed that policymakers debated a range of options to tweak the bond-buying program to support the economic recovery and judged that an update on its guidance for asset purchases was needed fairly soon. Participants also noted the committee could provide more accommodation, if appropriate, which extended some additional support to the non-yielding yellow metal.

Despite the supporting factors, the latest optimism over a potential vaccine for the highly contagious coronavirus disease kept a lid on any runaway rally for the safe-haven XAU/USD. This makes it prudent to wait for some follow-through buying before confirming that the precious metal has bottomed out in the near-term and positioning for any further recovery.

From a technical perspective, bearish traders might wait for a sustained break below the $1800 mark, or four-month lows touched earlier this week, nearing the important 200-day SMA, before placing fresh bets. That said, the XAU/USD is more likely to continue with its consolidative price action amid thin liquidity conditions on the back of the Thanksgiving holiday in the US.

Technical levels to watch

 

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