- Gold gained traction for the second straight session on Monday amid the US political uncertainty.
- Stronger USD, a positive tone around the equity markets might keep a lid on any strong move up.
Gold edged higher through the early European session and refreshed daily tops, around the $1887 region in the last hour, albeit lacked any strong follow-through.
The precious metal built on last week’s recovery move from one-month lows and gained some follow-through traction for the second consecutive session on Monday. Growing wariness about the actual outcome of the US presidential election forced investors to hedge their bets, which, in turn, was seen as a key factor that benefitted gold.
Apart from this, concerns over the potential economic fallout from the coronavirus-induced lockdowns in Western countries further drove some haven flows towards the precious metal and remained supportive. However, a combination of factors might hold bulls from placing aggressive bets and keep a lid on any strong gains for the XAU/USD.
The global risk sentiment got a strong boost on Monday in reaction to upbeat Chinese manufacturing PMIs. This was evident from a strong intraday positive move in the US equity markets. Apart from this, the prevalent bullish sentiment surrounding the US dollar could further contribute towards capping any meaningful upside for the dollar-denominated commodity.
Even from a technical perspective, last week’s break below 100-day SMA – for the first time since March – favours bearish traders. Hence, any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. That said, the downside is likely to remain limited ahead of Tuesday’s US presidential election.
In the meantime, Monday’s release of the US ISM Manufacturing PMI will be looked upon for a fresh impetus. The data, along with developments surrounding the coronavirus saga, might influence the USD price dynamics and produce some short-term trading opportunities later during the early North American session.
Technical levels to watch
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