Gold Price Analysis: XAU/USD flirts with session lows, below $1880 level

Gold witnessed some selling during the early European session and has now retreated to the lower end of its daily trading range, just below the $1880 level.

The precious metal struggled to capitalize on its early uptick, instead witnessed some selling near the $1886-87 region amid the prevalent upbeat market mood. The already strong global risk sentiment got an additional boost after UK regulators approved the use of the AstraZeneca/Oxford coronavirus vaccine.

Apart from this, hopes for additional US financial aid and growing bets on a strong global economic recovery in 2021 remained supportive of the risk-on environment. This, in turn, was seen as one of the key factors that undermined demand for traditional safe-haven assets and prompted some selling around the XAU/USD.

That said, the heavily offered tone surrounding the US dollar might extend some support to the dollar-denominated commodity and help limit any deeper losses. The USD failed to gain respite after Senate Majority Leader Mitch McConnell on Tuesday blocked the measure to raise the COVID-19 relief payments to $2,000.

Even from a technical perspective, the XAU/USD, so far, has managed to hold its neck above a one-month-old ascending trend-line support. This further makes it prudent to wait for some strong follow-through selling before trades start positioning for any further depreciating move amid year-end thin trading volumes.

Market participants now look forward to second-tier US economic data – Goods Trade Balance, Chicago PMI and Pending Home Sales – for some impetus. The data might influence the USD price dynamics. This, along with the broader market risk sentiment, might produce some short-term opportunities around the XAU/USD.

Technical levels to watch