- A subdued demand for USD helped gold attract some buying on Wednesday’s dips.
- With the hopes of the COVID-19 vaccine, market optimism should limit any further gains.
The gold It has managed to regain a significant portion of its initial lost ground to weekly lows and was last seen trading with modest losses, just below the $ 1,880 level.
The precious metal extended this week’s rejection drop from the $ 1,900 zone and saw some selling during the first half of trading action on Wednesday. The latest optimism about the promising results of the COVID-19 vaccine trial, coupled with a positive rally in equity markets, undermined demand for traditional safe-haven assets, including gold.
XAU / USD fell to multi-day lows around the $ 1,863 region, though it lacked a strong follow-up sell, instead drawing some buying on the dips to lower levels. Concerns about the economic fallout from the new coronavirus restrictions in several US states kept US dollar bulls on the defensive and extended some support to dollar-denominated commodities.
The USD couldn’t get any respite from Wednesday’s mixed US housing market data: Building permits and housing starts. That being said, a positive rally in US Treasury yields extended some support to the dollar and could keep any significant gains for the underperforming yellow metal in check. This, in turn, warrants some caution before placing new bullish bets.
Even from a technical perspective, the intraday decline confirmed a short-term collapse via a bearish pennant chart pattern. Therefore, any subsequent upward movement could be seen as a selling opportunity and risks disappearing quickly. This should limit the upside for the XAU / USD near the fundamental point of $ 1,900.
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