Gold Price Analysis: XAU/USD fades pullback from 50-day EMA as market sentiment worsens

Gold prices extend the late-US session weakness while staying heavy around $1,931/30 amid the early Wednesday in Asia. In doing so, the yellow metal fails to portray the rush to risk-safety, despite bounding off 50-day EMA, as the US dollar becomes the market favorite. Among the major catalysts, the Sino-American tussle and Brexit talks preceded pessimism surrounding the US stimulus talks and the EU-UK negotiations over post-Brexit trade relations. It should also be noted that the US dollar’s gains were the major burden on the yellow metal despite the risk-off mood.

Greenback locks the door for bullion buyers…

With the US dollar’s inverse relationship with gold, the surge in the US dollar index (DXY) to the highest in four weeks, to 93.47 by the end of Tuesday’s North American session, depressed the buyers even as the quote bounced off near-term key support. The US currency not only cheered upbeat prints of the NFIB Small Business Index but also cheered anti-risk moves.

Talking about the key catalysts, China had to bear the burden of the Trump administration’s dislike as US President Donald Trump suggests further sanctions on Beijing if he is re-election. The Republican leaders have already revised visa law for Chinese reporters and flashed signals of banning cotton imports from Xinjiang recently. Not only the US but India and the UK also confront the dragon nation and add to the market’s pessimism.

At home, Democrats are irritated by the Republicans' $300 billion bid for the coronavirus (COVID-19) aid package and indicate a further delay in the much-awaited stimulus.

It’s worth mentioning that the UK and the European Union’s (EU) Brexit talks and a halt in the AstraZeneca’s COVID-19 vaccine trials also sour the risk-tone sentiment.

Against this backdrop, S&P 500 Futures drop 0.70% to 3,312 by the press time after Wall Street marked heavy losses on Tuesday, led by Tesla’s 17% drop.

While China’s August month Consumer Price Index (CPI) can entertain the Asian traders, major attention will be given to the risk catalysts while making trade decisions.

Technical analysis

An area between 21 and 50-day EMA, currently around $1,941-06, restricts the yellow metal’s short-term moves.