The metal lost its traction while the USD raised its head
On Wednesday morning, gold witnessed the biggest fall in nearly seven years and plummeted below the $1,900 mark amid the strong recovery in the US Treasury yields that underpinned the US Dollar.
Gold started to lose ground on the news Russia came out with the first coronavirus vaccine developed by scientists of the Gamaleya Institute in Moscow. Russian President Vladimir Putin said that the mass production of the medication was expected in several weeks. The headlines induced investors to start taking profit at higher levels.
Meanwhile, global shares and US Treasury yields reached their peaks amid speculations that the US Congress will go out of the ongoing stalemate and will manage to agree over the massive stimulus package. US President Donald Trump tweeted that top-ranking Democrats would like to meet him and discuss the new package. Such news supported the USD and put pressure on the non-yielding metal.
However, while XAUUSD trades above the support at $1,820, which keeps the pair’s downside and will likely hold, some rallies may be expected. In the last hour, gold returned above the $1,900 mark and now trades at $1,930 with small daily gains.
While the USD gained back its positions, gold may also continue its march to the north amid the ongoing escalations in the Sino-American relations. Now when the Hong-Kong issue is a closed chapter (media tycoon Kimmy Lai was released on bail), Taiwan conflict comes to the fore: Beijing reiterates that the democratic island is an integral part of China, which puts Taiwan in a difficult situation.
Later today, the US will publish its inflation figures for July. The CPI y/y is expected to rise to 0.8% versus 0.6% prior, which may contribute to the USD strengthening and gold’s weakness. The support is pegged at $1,862, $1,847, $1,834 while the resistance is at $1,928, $1,956, $1,997.