Gold Price Analysis: XAU/USD flat-lined below $1900 level amid thin liquidity

Gold managed to rebound around $10 from daily swing lows and was last seen trading in the neutral territory, around the $1895 region.

Having faced rejection near the $1900 mark, the precious metal edged lower during the early part of the trading action on Thursday. The pullback was exclusively sponsored by the underlying bullish tone in the equity markets, which tends to undermine demand for the safe-haven XAU/USD.

However, the prevalent bearish sentiment surrounding the US dollar assisted the dollar-denominated commodity to attract some dip-buying near the $1885 region. In fact, the USD Index refreshed multi-year lows on Thursday amid the likelihood of additional US financial aid package.

Apart from this, expectations that the Fed will keep interest rates lower for a longer time extended some additional support to the non-yielding yellow metal. This, along with worries about the discovery of a new faster-spreading variant of the coronavirus might also help limit the downside.

As Eren Sengezer, Editor at FXStreet explains: “Despite the liquidity flooding the financial markets, inflation outlook in major economies remains subdued and major central banks voiced their commitment to keeping their policies extremely loose until they see a convincing increase in price pressures. This suggests that investors will not give up on gold in the near future.”

“On the other hand, a return to normality with mass COVID-19 vaccinations could make risk-sensitive assets more attractive, especially in the second half of 2021, and dampen the demand for the yellow metal. Overall, gold outlook remains bullish with the rate of increase in prices softening when compared to 2020,” Eren added further.

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