Gold rebounds modestly from 12-day lows, goes into consolidation near $1,680
- Global equity selloff ramps up demand for USD.
- Crude oil crash at start of week weighs on commodities.
- US Dollar Index rises for second straight day, looks to close above 100.
The XAU/USD pair fell to its lowest level since April 9th at $1,661 on Tuesday before staging a technical correction in the US afternoon. As of writing, the pair was trading in a relatively tight range near $1,680, losing 0.9% on a daily basis.
USD benefits from risk aversion
Crude oil crash witnessed at the start of the week with the front-month WTI contracts plunging into negative territory for the first time ever, flight-to-safety, once again, became the main market theme. Global equity indexes came under heavy selling pressure and fueled the demand for the USD with investors looking to cover their losses and close their positions.
Reflecting the risk-off atmosphere, major equity indexes in the US are down between 2.4% and 3.2% on Tuesday. The US Dollar Index, which climbed to 100.50 area earlier in the day, was last seen up 0.3% on the day at 100.25.
Meanwhile, the severity of the negative reaction gold is showing to easing ETF flows could be seen as a sign of weakening physical demand for the precious metal.
There won't be any significant macroeconomic data releases during the Asian trading hours on Wednesday and investors will keep a close eye on the performances of Asian equity indexes.
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.
