Gold Price Analysis: Sustains the bounce above $1700 ahead of US CPI
|- Risk-off at full steam, haven demand for Gold tops USD’s.
- Second coronavirus wave fears, trade tensions underpin.
- Gold appears weak while below 21-DMA at 1706.44.
Gold prices (XAU/USD) extend the rebound from the Asian low of $1693.76, as the risk-off sentiment seeps into Europe amid fears over the second wave of the coronavirus outbreak and escalating Australian-China trade tensions.
The yellow metal manages to sustain the bounce above the 1700 level, as the US dollar loses ground across the board amid a steep sell-off in the US Treasury yields, with markets repositioning ahead of the critical US CPI release.
The ongoing chatter over the negative interest rate also likely weighs on the US rates. The US dollar index (DXY) drops to fresh daily lows of 100.12, down 0.11% on the day. The DXY rallied to 100.44 in early Asia after China retaliated to Australia’s call for COVID inquiry by banning the imports from four Aussie abattoirs.
Further, optimism around the US-China Phase One trade deal also seems to the renewed weakness seen around the buck, in turn, benefiting the USD-denominated Gold. China’s Foreign Ministry reiterated that the US and China should implement the trade deal. The Chinese Finance Ministry issued a second list of tariff waivers for some US goods earlier today.
The traditional safe-haven, gold, will continue to derive support from growing fears over the second wave of coronavirus, with China and South Korea having reported new infections. Looking ahead, the US deflationary pressures will likely call for more stimulus from the US Federal Reserve (Fed) and boost gold’s attractiveness.
Gold: Technical levels to watch
At the press time, gold trades at 1703.20, up 0.30% on the day. The bulls now target the 21-DMA at 1706.44. The next resistance is aligned at 1710 (round number). On the flip side, the daily low will offer the immediate support, below which Monday’s low of 1690.05 could be tested.
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