Doubts in vaccine efficiency cap gains in risky assets, suggesting the yellow metal may stay afloat in the near term
Gold prices remain on the defensive, finding support just above the important 200-DMA around the $1,800 handle. Subdued demand for the greenback did little to lift the precious metal as the persisting vaccine optimism continues to undermine the safe-haven gold, capping recovery attempts following a massive sell-off seen earlier this week.
As the commodity lacks any strong follow-through buying, it looks like the prices will stay under pressure in the short term and could even challenge the $1,800 key support if relatively upbeat investor sentiment persists ahead of the weekend.
On the other hand, doubts in vaccine efficiency cap gains in risky assets on Friday, suggesting the yellow metal may stay afloat and refrain from a deeper retreat in the immediate term. Furthermore, the dollar was further pressured by weak economic data out of the United States, raising the possibility of more fiscal stimulus.
In a wider picture, the bullion continues to retreat from the descending 20-DMA, today at $1,1871. The commodity needs to regain this moving average and reclaim it as support so that to retarget the next barrier represented by the 100-DMA that arrives at $1,910. On the downside, a break below the $1,800 figure could pave the way to the $1,780 region last seen in July.
Considering that the global risk sentiment remains supported by the progress toward remedies for the coronavirus, investors will continue to express optimism, adding to buying pressure surrounding the high-yielding assets, with the smooth beginning of President-elect Joe Biden’s transition to the White House adding to risk appetite.
Against this backdrop, gold prices will likely struggle to see a robust recovery at this stage. Adding to the negative outlook, the yellow metal failed to stage any meaningful recovery in recent attempts, suggesting that the selling bias could persist. In other words, the path of least resistance remains to the downside now.