• Gold faces an uphill task in its recovery from the $1850 support area.
  • Rising covid cases overshadow vaccine optimism, boost stimulus hopes.
  • Downside more compelling while XAU/USD stays below $1900.

Gold’s (XAU/USD) rebound from six-week lows of $1850 faltered near the $1891 barrier on Tuesday, although the spot managed to hold on to the recovery gains. The bright metal settled the day around $1878 levels. Pfizer Inc’s vaccine progress led euphoria in the global markets subsided, as investors re-thought about its implications on the global economic recovery and prospects for further stimulus, limiting the downside in gold. However, the US dollar remained relatively stronger amid mixed sentiment on Wall Street, which capped the gains in XAU/USD.

Amid a partial US market holiday this Wednesday, gold wavers in familiar ranges below the $1891 critical resistance, underpinned by renewed hopes of additional fiscal and monetary policy stimulus to spur the global economic growth. Surging coronavirus cases in the US and Europe could threaten the economic recovery worldwide, rekindling additional stimulus expectations. However, should the virus concerns aggravate and translate into broad risk-aversion, the US dollar could pick up bids as a safe-haven, rendering gold-negative.

Gold: Short-tern technical outlook

Hourly chart

Despite a symmetrical triangle pattern confirmed on the hourly chart, the bulls are struggling to extend the upside while trading above the horizontal 21-hourly moving average (HMA) at $1879.

The hourly Relative Strength Index (RSI) remains side-lined just below the midline, indicating that the bulls could be losing conviction for a follow-through upside bias.

The bearish 50-HMA resistance at $1889 will offer immediate resistance, above which the bulls need to take out the horizontal 200-HMA hurdle at $1903 to reviving the recovery momentum.

Alternatively, acceptance below powerful support of $1878 could expose the previous month low of $1860. The next downside target awaits at $1850-49, the November 9 low and September 28 low.

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