- XAU/USD dropped below $1,850 but reversed its direction.
- Troy ounce of precious metal is up more than $50 this week.
- Broad-based USD weakness allows bullish momentum to remain intact.
The XAU/USD pair gained 1.35% on Tuesday with the greenback suffering heavy losses against its rivals as investors cheered EU recovery fund agreement. Additionally, coronavirus vaccine hopes allowed risk flows to continue to dominate the markets and further weighed on the USD.
Following Tuesday's rally, gold spiked to its highest level since September 2011 at $1,865 during the Asian session on Wednesday. There was no apparent catalyst behind that move and XAU/USD staged a technical correction in the following hours and dropped below $1,850.
Nevertheless, the unabated USD weakness helped the pair, once again, gain traction. As of writing, gold was gaining 0.93% on the day at $1,859. On a weekly basis, the troy ounce of the precious metal is up more than $50.
Concerns over the USD funding strains and the currency's safe-haven status caused the US Dollar Index (DXY) to rise in the second quarter of the year in the face of the coronavirus crisis. After staying around 100 until early June, the DXY turned south and is now at its lowest level since March 9th at 94.96, down 0.2% on the day.
In the second half of the day, investors will be paying close attention to Wall Street's action. At the moment, the S&P 500 futures are trading in the negative territory, suggesting that US stocks could slide and the DXY could stage a rebound in the second half of the day.
Gold technical outlook
In a recently published analysis, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, said gold was on course for September 2011 high of $1,921.50.
“Please note there is room for an overshoot to the top of a 49-year channel at $1,983.00. It represents our long-term target. This should hold the initial test and provoke some profit-taking," Jones added. “Support is offered by the 55-day MA at $1,797 and the four-month uptrend at $1,795. Below $1,795 lies the $1,765 May high. This guards the $1,670 June low.”
Additional key levels
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