XAU / USD bears hold reins below $ 1,900 amid strong US dollar

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  • Gold prices remain depressed after posting the biggest losses in two weeks.
  • Market sentiment worsens amid the virus, Brexit concerns, Wall Street cannot applaud US stimulus.
  • The US dollar index rose the most since August 19.

Gold prices they hold lower ground near $ 1,860 in the middle of early Wednesday morning in Asia. The yellow metal fell further since Dec. 9 amid the strength of the US dollar. While the dollar benefited from the approval of the US coronavirus (COVID-19) aid package and the pervasive mood of risk, sentiment remains pessimistic as Brexit stagnation prevails as markets rally. they worry about the new variant of the covid.

The dollar king has reason to celebrate …

While major market commentators blame risk for the latest rise in the US Dollar Index (DXY), other reasons also contribute to the strength of the dollar. First, the approval of the US covid aid package and government funding amounting to nearly $ 2.3 trillion in total suggest that the world’s largest economy will get off to a good start in 2021. Second, America is also expected to be in better shape under Joe Biden’s leadership. the dollar. Additionally, other developed economies such as Europe and the UK are struggling with Brexit, while China has less acceptance in the West, which in turn directs market players towards the USD.

On the risk side, European Union (EU) policy makers are still not satisfied with the UK’s relief on fisheries, although they cite that talks may continue. It should be noted that fishing and a level playing field remain the biggest obstacles in the talks. Continuing, more countries cut their British travel amid fears of an upcoming pandemic of COVID-19 variants, while the UK government sounded alarms of a shortage of virus test kits when schools may open in January.

Elsewhere, the US imposes more visa restrictions on China and also makes serious accusations about a Russian attack on the Treasury.

Against this backdrop, Wall Street benchmarks closed mixed and the S&P 500 fell for a third day. Yields on 10-year US Treasuries could also have been affected by risk aversion, which fell 1.8 basis points at the end of the North American session on Tuesday.

Going forward, US Unemployment Benefit Claims and Durable Goods Orders will accompany Michigan’s Consumer Sentiment Index to round out today’s schedule. However, more attention will be paid to risk catalysts like Brexit and virus updates for fresh momentum.

Technical analysis

If the $ 1,900 level is not breached, the yellow metal is heading towards a confluence of the 21-day EMA and an ascending trend line from Nov. 30, currently around $ 1,856.

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