Gold trades with modest gains below $1950 level, lacks follow-through

Gold edged higher on the first day of a new week and was last seen trading near the top end of its daily trading range, just below the $1950 level.

The prevalent selling bias surrounding the US dollar – amid doubts over the US fiscal stimulus measures – was seen as one of the key factors that benefitted the dollar-denominated commodity. The odds for a massive stimulus have fallen practically to zero after Democratic voted to block a Republican bill that would have provided around $300 billion in new coronavirus aid.

Moreover, Brexit woes further contributed to uncertainty and extended some support to the commodity. However, renewed optimism over a potential vaccine for the highly contagious coronavirus disease provided a strong boost to the global risk sentiment. This, in turn, undermined demand for traditional safe-haven assets and might keep a lid on any strong gains for the precious metal.

AstraZeneca announced the resumption of trials for its COVID-19 vaccine candidate and Pfizer also announced the likelihood of presenting late-stage data for its own vaccine by late October. Apart from this, investors also seemed reluctant to place any aggressive bets ahead of a two-day FOMC meeting, starting on Tuesday, warranting some caution before placing any aggressive bets.

In the meantime, the commodity seems more likely to extend its sideways consolidative price action amid absence relevant market moving economic releases from the US.

Technical levels to watch