Gold Price Analysis: XAU/USD bears keep reins below $1,900 amid US dollar strength
|- Gold prices remain depressed after marking the heaviest losses in two weeks.
- Market sentiment worsens amid virus, Brexit concerns, Wall Street can’t cheer US stimulus.
- US dollar index surged the most since August 19.
Gold prices hold lower ground near $1,860 amid the early Wednesday morning in Asia. The yellow metal dropped the most since December 09 amid broad US dollar strength. While the greenback benefited from the passage of the US coronavirus (COVID-19) aid package and broad risk-off mood, sentiment remains downbeat as Brexit deadlock prevails while markets worry from the fresh covid variant.
King Dollar has reasons to celebrate…
Although major market chatters blame risk-off for the latest surge in the US dollar index (DXY), other reasons also contribute to the greenback’s strength. Firstly, the passage of the US covid aid package and government funding with nearly $2.3 trillion amount in total suggest that the world’s largest economy will have a good start to 2021. Secondly, hopes that America will be in better shape under Joe Biden’s leadership also back the greenback. Additionally, other developed economies like Europe and the UK are jostling with Brexit whereas China has less acceptance in the West, which in turn direct market players towards the USD.
On the risk side, the European Union (EU) policymakers aren’t yet satisfied with the UK’s relief on fisheries while citing the talks can continue. It should be noted that fisheries and a level playing field are still the biggest hurdles in the talks. Moving on, more countries cut their British travels amid fears of a next pandemic from the COVID-19 variants while the UK government rang alarms of a shortage of virus testing kits when the schools may open in January.
Elsewhere, the US levies more visa restrictions on China while also marking serious allegations over a Russian hack to the Treasury.
Against this backdrop, Wall Street benchmarks closed mixed with the S&P 500 declining for the third day. Also portraying the risk-off mood could be the US 10-year Treasury yields that drop 1.8 basis points by the end of Tuesday’s North American session.
Looking forward, the US Jobless Claims and Durable Goods Orders will accompany the Michigan Consumer Sentiment Index to populate today’s calendar. However, major attention will be given to the risk catalysts like Brexit and virus updates for fresh impulse.
Technical analysis
Failures to cross the $1,900 mark directs the yellow metal towards a confluence of 21-day EMA and an upward sloping trend line from November 30, currently around $1,856.
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