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  • Widespread riots in the US, sustained USD selling assisted gold to gain some traction on Monday.
  • The recent optimism over a COVID-19 vaccine and global economic recovery capped the upside.
  • The intraday pullback warrants some caution before positioning for any strong appreciating move.

Gold struggled to capitalize on its early uptick to over one-week tops and was last seen trading with only modest daily gains, around the $1735 region.

The precious metal opened with a modest bullish gap on the first day of a new trading week and was being supported by a combination of factors. The US dollar added to its recent losses and was further pressured by widespread protests over the death of George Floyd at the hands of Minneapolis police. Sustained USD selling turned out to be a key factor that benefitted the dollar-denominated commodity.

This comes amid a continuous rise in the number of coronavirus cases globally, which further underpinned the metal’s perceived safe-haven status. However, the recent optimism over a potential COVID-19 vaccine, the easing of lockdown restriction across the world and hopes of a sharp V-shaped recovery for the global economy kept a lid on any strong rally, at least for the time being.

Investors also breathed a sigh of relief after the US President Donald Trump began the process of ending Hong Kong’s special status but did not withdraw from the US-China phase-one trade deal. This coupled with the incoming Chinese data pointed to a pickup in the country’s manufacturing sector activity, which further boosted investors’ confidence and contributed towards capping gains.

Meanwhile, the intraday pullback from the $1744-45 region could further be attributed to a modest pickup in the US Treasury bond yields, which tends to drive flows away from the non-yielding yellow metal. This makes it prudent to wait for some strong follow-through buying before traders start positioning for an extension of last week’s goodish rebound from sub-$1700 levels.

Moving ahead, market participants now look forward to the US economic docket, highlighting the release of ISM Manufacturing PMI later during the early North American session. The data might influence the USD price dynamics and produce some meaningful trading opportunities around the commodity.

Technical levels to watch