Gold Price Analysis: XAU/USD nurses losses below $1,800, China’s return, US dollar moves in focus

• Gold bears catch a breather around November 30 low after consecutive five days of declines.
• US dollar ignores pullback in Treasury yields, rises for second day on upbeat data, stimulus hopes.
• No major data/events in Asia, except for Aussie jobs report, but Chinese traders’ reaction to latest catalysts will be important.

Gold struggles to overcome the lowest levels in 12 weeks, marked the previous day, with a brief bounce to $1,776 amid the early Asian session on Thursday. In doing so, the yellow metal tries to defy the five-day downtrend but the corrective pullback awaits fresh clues as China hits the floor after one-week holidays. Also challenging the mood could be the US dollar’s latest gains despite the easy move by Wall Street benchmarks and the Treasury yields.

Dragon’s moves during the year of Ox will be the key…

As China returns to trading after the Lunar New Year holidays after a week, it may start reacting to the latest catalysts ranging from vaccine optimism to the US hints on future relations, not to for the jump in the American bond yields. Among them, its reply to US President Joe Biden’s indirect threat saying, “There will be repercussions for China” could add to the bullion’s safe-haven demand. Furthermore, the Sino-Australian tussle and the latest turning down New Zealand seafood imports may also add to the geopolitical tension.

Elsewhere, the US dollar gains from over a month’s low to the eight-day top recently gained support from Wall Street and bond yields while taking clues from the upbeat Retail Sales, Industrial Production and Producers Price Index (PPI) data at home. Also on the positive side could be the nearness to US President Biden’s $1.9 trillion covid relief package. In his latest comments, during the meet with the labor leaders, US President Biden said, “Polls show the majority support American rescue plan.

Amid these plays, S&P 500 Futures waver around 3,930 while trying to keep the previous day’s recovery moves. However, the US 10-year Treasury yields’ latest weakness, down 1.7 basis points (bps) to 1.282%, probes the risk-on mood.

Looking forward, an escalation in the US-China tussle may not endanger the US dollar’s run-up and can keep the gold prices heavy if Beijing pushes for extra liquidity and highlights those moves that the dislike for America.

Technical analysis

A clear break of over 2.5-month-old support line, now resistance around $1,790, directs gold prices toward the November 2020 low near $1,765.