Gold Price Analysis: XAU/USD picks up bids toward $1,900 as stimulus news propel risk

• Gold refrains from extending Wednesday’s downbeat performance, bounces off $1,884.74.
• US government passed stopgap funding bill, pushed back talks on major stimulus to Thursday.
• Nikkei suggests Japanese government is up for additional economic aid.
• China’s absence highlights Japan, risk catalyst for immediate direction.

Gold prices rise to $1,888 during the early Asian session on Thursday. The yellow metal snapped the previous two days’ advances on Wednesday before closing the day around $1,885. While the US dollar weakness initially pleased the bullion buyers, risk-on sentiment propelled Wall Street benchmarks, which in turn drove funds toward the high-yielding assets.

Further stimulus on the way?

Even if US House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin failed to agree on the much-awaited aid package, for which Democrats bid for $2.2 trillion, the recent passage of stopgap funding and a one-day leeway to the stimulus talks keep markets hopeful. The ruling Republican party is said to have struck around $1.5-$1.6 trillion offer that pushed the House to postpone the negotiations to Thursday and give rise to expectations of a solution.

Not only in the US but Japan is also up for further stimulus to combat the coronavirus (COVID-19)-led economic slowdown, as per Nikkei. At the same time, the UK and Europe are also searching for ways to avoid further economic damages due to the pandemic.

It’s worth mentioning that the US presidential election debate turned out to be a flop show whereas COVID-19 vaccine hopes remain on the table. Furthermore, Brexit talks going on but the fears of national lockdown, due to the virus, in the UK are challenging the market optimism.

Against this backdrop, S&P 500 Futures gain 15 points, or 0.40%, to 3,352 by the time of the press after Wall Street benchmarks closed in positive at the end of Wednesday’s trading. Further, the US 10-year Treasury yields gained over four basis points (bps) to 0.686% during the noted period.

Looking forward, global markets are likely to witness lesser volatility during the Asian session as China is off for a week. Even so, risk catalysts like virus, stimulus and Brexit can entertain the gold traders.

Technical analysis

While 10-day EMA level surrounding $1,895 offers an immediate upside barrier, the $1,900 threshold and August 26 low close to $1,902/03 also challenge gold buyers. As a result, $1,875 and the 100-day EMA near $1,855/56 are likely to return to the chart.