Gold Price Analysis: XAU/USD trades with modest losses, around $1945 region

• Gold edged lower after hitting fresh two-month tops during the Asian session on Wednesday.
• Hopes for more US fiscal stimulus, softer risk tone helped limit any deeper losses for the metal.
• The focus will remain on the results of US Senate election, ADP report and the FOMC minutes.

Gold witnessed a modest pullback from two-month tops and fell to an intraday low level of $1941 during the Asian session, albeit lacked any strong follow-through selling.

The precious metal stalled its recent bullish momentum near the $1955 region as investors opted to take some profits off the table and wait for the results of a crucial US Senate runoff election in the state of Georgia. The outcome will determine the control of the Senate and also have a big impact on the incoming President Joe Biden’s ability to pursue his preferred economic policies.

That said, the incoming updates have been indicating a Democrat victory. This, in turn, added to the likelihood of additional US fiscal stimulus measures, which extended some support to the non-yielding yellow metal. Apart from this, a softer tone around the equity markets might further help limit any deeper losses for the safe-haven XAU/USD, at least for the time being.

Meanwhile, expectations of larger government borrowing pushed the benchmark 10-year US Treasury yield to the highest level since March and eased the bearish pressure surrounding the US dollar. This might turn out be a key factor that could cap any strong gains for the dollar-denominated commodity ahead of Wednesday’s release of the ADP report on the US private-sector employment.

The key focus, however, will be on the release of the latest FOMC monetary policy meeting minutes. The FEd’s policy outlook will play a dominant role in influencing the near-term USD price dynamics and assist investors to determine the next leg of a directional move for the XAU/USD.

Technical levels to watch