Gold Price Analysis: XAU/USD nurses biggest losses in three months around $1,850

Gold prices lick their wounds around $1,956, near the lowest since September 28, during the early Asian session on Tuesday. The yellow metal posted the heaviest declines since August 11, while refreshing the multi-day low, after the news concerning the coronavirus (COVID-19) propelled market sentiment and extended the US dollar strength.

Vaccine hopes bolster market optimism…

With a 90% effective rate, the covid vaccine from Pfizer-BioNTech offers the biggest success in finding the cure for the deadly virus. Global markets cheer the welcome development while magnifying the initial optimism backed by Joe Biden’s victory in the US elections.

The mood enthused DJI30 and S&P 500 Futures to refresh the record highs whereas the US 10-year Treasury yields also rose sharply, with over 10 basis points (bps) to 0.92%, by the end of Monday’s North American trading. Further, the US dollar index (DXY) also benefited from the risk-on mood while bouncing off September 01 low to 92.83.

In doing so, global traders dumped gold while taking the risk of the greenback and heavy profits from equities. However, the bullion bears seem to turn cautious as the quote approaches September lows that hold the key to the further downside towards the early July top.

Also, fears that the US economy still faces the risk of a default wave, as conveyed by the US Federal Reserve’s biannual Financial Stability Report, probe the risk-on mood. In the same line, American disappointment over European trade tariffs and uncertainty over Brexit join hands with Donald Trump’s efforts to keep the White House while suggesting additional challenges to the market optimism.

On the calendar, China inflation data for October can entertain Asian traders while risk catalysts, mentioned above, will keep the driver’s seat.

Technical analysis

September month’s low near $1,848 becomes the key support to watch as a break of which can recall the early-July top surrounding $1,818.