Gold looks to extend Monday's bounce as dollar remains weak

Gold is looking to extend Monday's bounce from $1,704 to $1,724 amid sustained weakness in the US dollar, the yellow metal's biggest nemesis. 

At press time, the safe-haven metal is changing hands near $1,722, representing 0.16% gains on the day. Meanwhile, the dollar index, which tracks the value of the greenback against majors, is hovering near 96.50, down 0.12% on the day. 

The index fell by nearly 0.5% on Monday, helping gold reverse a major portion of the early decline after the Federal Reserve announced that it would start purchasing corporate bonds through the secondary market corporate credit facility (SMCCF). 

The central bank has launched multiple emergency facilities over the past three months to ensure smooth market functioning in the wake of the coronavirus pandemic. As a result, its balance has expanded by over $3 trillion since the end of February. 

Both the dollar weakness and the recovery in gold could be short-lived if the coronavirus numbers continue to rise in China, the US, and other nations. Asian and European equity markets fell on Monday alongside losses in the US stock futures on fears of the second wave of the virus outbreak. The equity market sentiment, however, turned risk-on during the American trading hours, possibly due to Fed's announcement. 

If the risk-on sustains, the dollar will likely remain weak, helping gold print gains. At press time, the futures on the S&P 500 are reporting a 0.80% gain on the day. 

Technical levels