Gold Price Analysis: XAU/USD sits near one-week tops, above $1850 level

Gold continued scaling higher through the early European session and climbed to near one-week tops, around the $1857 region in the last hour.

Following the previous day's range-bound price action, the precious metal caught some fresh bids on Wednesday and built on this week's goodish rebound from the vicinity of the $1800 mark. The US dollar fell for the third consecutive session on Wednesday, which, in turn, benefitted the dollar-denominated commodity.

Meanwhile, investors now seemed to have turned cautious ahead of the President-elect Joe Biden's inaugural ceremony later this Wednesday. This was seen as another factor that extended some additional support to the precious metal's safe-haven status. That said, the underlying bullish sentiment might cap gains.

The stimulatory bias of the incoming US president Joe Biden remains at the centre of market attention. The US Treasury Secretary nominee Janet Yellen further lifted market expectations for additional US fiscal stimulus during her confirmation hearing on Tuesday and urged lawmakers to act big on the COVID-19 relief package.

Hopes for more aggressive government spending in 2021 might continue to support the US Treasury bond yields and keep a lid on any runaway rally for the non-yielding yellow metal. Apart from this, the optimism over the COVID-19 vaccine rollouts might further hold bulls from placing aggressive bets around the safe-haven XAU/USD.

Hence, any subsequent positive move might still be seen as a selling opportunity and remain capped near last week's swing high, around the $1863-64 supply zone. However, a sustained move beyond will negate the negative bias and prompt some aggressive short-covering move, which might push the XAU/USD back towards the $1900 mark.

Technical levels to watch