Gold Price Analysis: XAU/USD licks its wounds around $1,900

• Gold pulls back from $1,898.57 after two consecutive days of downside.
• Broad US dollar strength becomes the key catalyst.
• Virus woes, Sino-American tussle continues to offer background music to global central bankers’ dovish songs.
• A busy day ahead as Japan returns from extended weekend and monthly PMIs are up for a grab.

Following its uninterrupted declines since Monday, Gold probes further downside around $1,900, currently near $1,900.50, during the pre-Tokyo open trading on Wednesday. The yellow metal has so far dropped the most in six weeks as the US dollar gauge rises to the late-July tops. In doing so, the bullion ignores market pessimism, mainly led by the coronavirus (COVID-19) resurgence.

Bears await more signals…

Although a two-month high of the US dollar index (DXY) keeps disappointing the gold traders, the recent pullback in the global equities, coupled with an absence of major catalysts question the yellow metal’s further downside. Additionally, market players may also stay cautious and trade lesser ahead of the key day comprising the preliminary readings of PMIs and RBNZ.

While the COVID-19 resurgence and dovish words of the global central bankers kept the US dollar in demand off-late, upbeat prints of American economics also strengthened the greenback. Further, the US-China tussle, recently over the South China Sea, joins the Brexit woes to weigh on the market sentiment previously before the technology shares recovered.

Against this backdrop, S&P 500 Futures defies the previous day’s recovery moves while printing a 0.20% loss near 3,295.

Looking forward, gold traders will keep eyes on the global PMIs, starting from Australia, to determine near-term moves whereas monetary policy action by the Reserve Bank of New Zealand (RBNZ) and the return of Japanese traders from a long weekend will also be the key. Furthermore, the Aussie Retail Sales and comments from the BOJ and the Fed’s respective bosses are additional catalysts, other than the risk factors like the virus, Brexit and the US-China tension, to keep an eye on.

While activity numbers are likely to bear the burden of virus wave 2.0, any surprises may offer a reason for the market to post pullback in gold prices.

Technical analysis

A daily closing below 50-day EMA, at $1,915 now, gradually drags the precious metal towards August month’s low of $1,863.24.