- Gold edged lower for the second consecutive session on Wednesday amid a modest USD uptick.
- The prevalent cautious mood helped limit the downside for the metal ahead of the FOMC decision.
Gold remained depressed through the early European session, albeit has managed to recover a bit from weekly lows and was last seen trading just below the $1850 level.
The precious metal added to the overnight losses and witnessed some follow-through selling for the second consecutive session on Wednesday. The downtick was exclusively sponsored by a modest pickup in the US dollar demand, which tends to undermine the dollar-denominated commodity.
The USD edged higher during the first half of the trading action on Wednesday amid doubts over the timing and the size of a new US economic stimulus package. That said, the prevalent cautious mood around the equity markets helped limit the downside for the safe-haven XAU/USD.
Fading hopes for rapid approval of the US stimulus plan comes amid growing market worries about the potential economic fallout from the continuous surge in coronavirus cases. Apart from this, escalating US-China tensions in the South China Sea further weighed on investors’ sentiment.
The lower risk appetite was reinforced by a softer tone around the US Treasury bond yields, which extended some additional support to the non-yielding yellow metal. Market participants also seemed reluctant to place aggressive bets ahead of the FOMC monetary policy decision on Wednesday.
Heading into the key event risk, the release of US Durable Goods Orders data will be looked upon for some trading impetus. This, along with the broader market risk sentiment, US stimulus headlines and developments surrounding the coronavirus saga, might also influence the XAU/USD.
Nevertheless, traders are likely to wait for some strong follow-through selling before positioning for any further depreciating move. The XAU/USD, so far, has managed to defend a one-week-old ascending trend-line support, which if broken should pave the way for additional weakness.
Technical levels to watch
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