The metal losses ground amid a combination of bearish factors
Gold prices keep sliding for the fourth day in a row on Tuesday, accelerating the decline amid a rallying dollar. The US currency received a strong boost after US President Joe Biden nominated Jerome Powell for a second term as chair of the US Federal Reserve. Investors considered the other leading candidate, Lael Brainard, to be the more dovish of the two. Rising US Treasury yields added to the selling pressure surrounding the yellow metal. The yield on the two-year US Treasury note jumped to the highest level since last spring.
As a result, on Tuesday the XAUUSD pair plunged to more than two-week lows around $1,790 where the 100- and 200-DMAs converge. The technical picture has deteriorated further since yesterday when the prices failed to hold above the 20-day SMA. In recent trading, the bullion derailed the $1,800 psychological support for the first time since November 5, suggesting downside risks could persist further at least in the short term.
A combination of stronger dollar, hawkish Federal Reserve expectations, and rising US bond yields implies that the precious metal could extend losses to the $1,760 area that triggered a bounce and a subsequent rally that brought the prices to five-month highs around $1,877 just a week ago.
In the immediate term, gold prices could be affected by fresh US economic data through dollar dynamics. Manufacturing and service PMIs may push the USD index to fresh mid-2020 highs later in the day if the figures exceed expectations. In this scenario, gold prices could challenge the mentioned moving averages which so far manage to cap the selling pressure.
Meanwhile, the rising number of COVID-19 cases in several countries along with the reimposition of lockdown measures could hold back the downside pressure and help limit deeper losses in the bullion.