Gold managed to rebound around $35-$40 from over one-month lows and was last seen hovering near the top end of its daily range, near the $1855 region.
The precious metal managed to find decent support near the $1817 region and for now, seems to have stalled its recent sharp fall witnessed over the past four trading sessions. The intraday bounce was exclusively sponsored by a softer risk tone, which tends to underpin demand for the safe-haven XAU/USD.
Growing market worries about the continuous surge in coronavirus cases and the imposition of stricter lockdown restrictions in Europe/China weighed on investors’ sentiment. This was evident from a modest pullback in the equity markets, which, in turn, drove some haven flows and extended support to the commodity.
However, a bid tone surrounding the US dollar might hold bulls from placing aggressive bets around the dollar-denominated commodity. The greenback remained well supported by the ongoing rally in the US Treasury bond yields, which might further collaborate to cap any meaningful upside for the non-yielding yellow metal.
Investors have been pricing in the prospects for a more aggressive US fiscal spending in 2021, 1, including increased direct payments and considerable infrastructure spending. Friday’s disappointing NFP print further fanned the speculations and pushed the US Treasury bond yields to the highest level since March.
This makes it prudent to wait for some strong follow-through buying before confirming that the recent corrective fall is over and positioning for any further appreciating move. In the absence of any major market-moving economic releases, the broader market risk sentiment and the USD/US bond yield dynamics will continue to play a dominant role in influencing the XAU/USD.