The yellow metal prices failed to stop its previous day losing streak and dropped to 1,923.20 level mainly due to the broad-based U.S. dollar strength, backed by the upbeat prints of the NFIB Small Business Index and anti-risk moves. However, the broad-based U.S. dollar strength could be considered as one of the main reasons behind the yellow-metal latest weakness.
Whereas, the bullish sentiment around the U.S. dollar was further improved after the U.S. markets saw a second rout in tech stocks in less than a week, which gave a boost to the U.S. dollar and dragged the yellow-metal down. On the other hand, the market earlier optimism over the coronavirus (COVID-19) vaccine/treatment was overshadowed by the latest reports that suggested the pause in AstraZeneca’s COVID-19 vaccine trials. This, in turn, undermined the market trading sentiment, which might help the gold prices to limit its deeper losses.
It’s also worth reporting that the gold prices faced a steep drop and then recovery during the previous session. However, the rally was backed by major selloffs in stocks. The yellow-metal prices fall, bounce, and flatten could be attributed to the second U.S. big tech stocks record-breaking fall, which caused U.S. markets to fall. The overnight surge in gold prices along with lift in the dollar at the same time seems unusual, as one generally falls as the other gains. But the gains in the gold prices were short-lived as the U.S. dollar becomes the market favourite.
However, the equity market has been flashing red since the Asian session started. The reason could be associated with the major negative catalysts. Be it the further delay in the much-awaited coronavirus (COVID-19) relief package or the resurgence of COVID-19 new cases in the U.S., not to forget the long-lasting US-China and China-India tussle, all these factors are weighing on the market trading sentiment, which could be considered as the main factors that capped further downside momentum for the safe-haven assets. Apart from this, the fears of the U.K. and the European Union’s (E.U.) Brexit talks and a pause in the AstraZeneca’s COVID-19 vaccine trials also add pessimism around the market trading sentiment.
On the contrary, the stabilizing virus figures in Australia, China, and Japan helps the market trading sentiment to limit its deeper losses and might cap the further upside for the gold.
At the US-China front, the U.S. President Donald Trump pledged to “stand tough on China”, if he is re-elected. However, these statements could be witnessed by the Trump administration’s recent punitive measures over the Chinese diplomats. Whereas, the Dragon Nation did not feel reluctant to take revenge from the U.S. while announcing new U.S. visa restrictions.
At the USD front, the broad-based U.S. dollar extended its previous day bullish trend on the day amid downbeat sentiment in the market. Also supporting the U.S. dollar prices could be the major selloffs in U.S. stocks. The U.S. markets saw a second rout in tech stocks in less than a week, which underpinned the U.S. dollar. However, the gains in the U.S. dollar kept the gold prices under pressure as the price of gold is negatively related to the price of the U.S. dollar. Whereas, the U.S. Dollar Index, which tracks the greenback against a basket of other currencies rose by 0.07% to 93.502 by 10:01 PM ET (3:01 AM GMT).
Gold prices are supported amid a selloff in the U.S. stocks, especially Amazon, Apple, Microsoft and Facebook. Gold prices are now trading sideways around 1,927 level, with immediate support at 1,922 and resistance at 1,935 level. On the higher side, the XAU/USD may find next resistance at 1,942 level upon the breakout of 1,935 level. Conversely, a bearish breakout of 1,922 level may lead gold prices towards 1,917 and 1,910 level. Good luck!