Gold drops to multi-day lows, manages to hold above $1600 mark
|- The safe-haven gold edged lower on Tuesday amid a further improvement in the risk sentiment.
- Some follow-through USD strength further weighed on the dollar-denominated commodity.
- Concerns over an imminent global recession might help limit deeper losses, at least for now.
Gold traded with a mild negative bid through the early European session and dropped to multi-day lows in the last hour, albeit has still managed to hold above the $1600 mark.
The precious metal extended its sideways consolidative price action on Tuesday and remained confined well within a broader trading range held over the past five trading sessions or so as investors awaited a fresh catalyst before positioning for the next leg of a directional move.
Against the backdrop of the Fed's unlimited QE and a massive $2.2 trillion US economic stimulus package, investors' sentiment got an additional boost from a sharp rebound in the Chinese manufacturing sector activity boosted investors' confidence on Tuesday.
This was evident from a further recovery in the global risk sentiment and reinforced by a goodish pickup in the US Treasury bond yields. This eventually dampened demand for traditional safe-haven assets and exerted some pressure on the non-yielding yellow metal.
Meanwhile, the US dollar added to the overnight recovery gains and further undermined demand for the dollar-denominated commodity. However, concerns over the economic fallout from the coronavirus pandemic extended some support.
This coupled with the ever-increasing number of confirmed coronavirus cases and tightening lockdowns across the world should also help limit deeper losses, at least for the time being, making it prudent to wait for a sustained break through the recent trading range.
Moving ahead, market participants now look forward to the US economic docket – featuring the release of Chicago PMI and Conference Board's Consumer Confidence index – in order to grab some short-term trading opportunities.
Technical levels to watch
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