Gold makes sharp U-turn from multi-year highs, slumps to $1,730 area
- Gold struggles to find demand as risk rally intensifies.
- Wall Street surges higher after opening in positive territory.
- Broad-based USD weakness helps XAU/USD limit its losses.
The troy ounce of the precious metal rose to its highest level since December of 2012 at $1,765 on Monday but fell sharply during the American trading hours. As of writing, the XAU/USD pair was trading at $1,730, losing 0.7% on a daily basis.
Safe-haven assets lose interest on Monday
The risk rally at the start of the week seems to be weighing on the safe-haven demand and hurting gold. The positive results announced by Moderna, one of the leading biotech companies working on a coronavirus vaccine, on its first human trials seem to be the primary catalyst behind improving market sentiment.
Reflecting the risk-on market atmosphere, Wall Street's main indexes are posting decisive gains. At the moment, the Dow Jones Industrial Average is up 3.75% as the top-performer.
Meanwhile, the greenback remains on the back foot as investors are shifting their focus to risk-sensitive major currencies such as the EUR, GBP and AUD. The US Dollar Index (DXY), which gained more than 1% last week, is now losing 0.7% on the day at 99.66.
Although the USD weakness is helping XAU/USD limit its downside for the time being, the pair could remain under pressure if Asian stocks carry the rally into a second straight day.
On Tuesday, FOMC Chairman Jerome Powell will be testifying before the US Senate Banking Committee.
Technical levels to watch for
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
