Happy Friday traders,

Prices for the yellow metal, GOLD, managed to put a stop to their sharp declines of the previous day, recovering from the weekly lows at the $ 1852.80 to 1,867.63 level, mainly due to the weakness of the broad-based US dollar, which was  triggered by concerns over the economic recovery, due to the lack of a monetary and fiscal stimulus package. This eventually lent support to the gold prices, as the weaker USD tends to make it cheaper for holders of other currencies to buy the precious metal.

The downbeat market trading sentiment, driven by the worsening coronavirus (COVID-19) conditions in the US and Europe, is also keeping the gold prices bullish. Apart from this, the losses on the equity markets were further bolstered after US Treasury Secretary Steven Mnuchin’s call to cut the Fed’s emergency funding program, which lent further support to the prices for the yellow metal. On the contrary, the optimism over a possible vaccine and treatment for the highly infectious coronavirus keeps challenging the market risk-off mood, which might lead to losses in the GOLD prices. The precious metal is currently trading at 1,867.30, and consolidating in a range between 1,861.00 and 1,868.05.

However, the sentiment surrounding the global markets remains sour, amid stimulus concerns and growing coronavirus fears. As we have already mentioned, the hopes of continuation of the US fiscal stimulus discussions were dimmed by US Treasury Secretary Steven Mnuchin’s call to cut the Fed’s emergency funding program. As per the latest report, Mnuchin urged the Federal Reserve to return funds for a general loan system that it is administering, in order to support several organizations during the coronavirus pandemic. The US Federal Reserve responded by saying that it “would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.” All of these factors are weighing on the market trading sentiment, and this could be considered one of the main factors for the on-going bullish moves in GOLD.

This would be negative for GOLD , as the lack of stimulus would underpin the US dollar. However, on the flipside, Republican heavyweight McConnell has announced that his party is ready to resume the discussions with the Democrats on a new COVID-19 relief package. The talks have been deadlocked for months, and so far, there has been no agreement in sight. This news is positive for the yellow metal prices, as a stimulus package would have the effect of reducing the price of the US dollar and making it more affordable for holders of other currencies to purchase GOLD .

As a result, the broad-based US dollar failed to stop its overnight losses, and it remained bearish on the day, mainly due to the mixed US stimulus News. The doubts over economic recovery in the US, in the wake of the resutgence of the coronavirus, are also weighing on the US dollar. Thus, the losses in the US dollar could also be a key factor that has kept the gold prices higher, as the price of GOLD is inversely related to the price of the US dollar. Meanhile, the dollar index remains unchanged at 92.306 (=USD), off Thursday’s low of 92.236, though it is still down 0.3% for the week.

Increasing numbers of coronavirus cases in Europe, the US and some Asian countries, like Japan, continue to fuel worries about global economic recovery. As per the latest report, California announced a ban on all indoor social functions and non-essential activities outside the home, across most of the state, in efforts to curb an alarming surge in coronavirus infection. As a result, the market sentiment turned sour on the day.

In the absence of any major data/events on the day, the market traders will keep their eyes on the continuous drama surrounding the US stimulus package. In the meantime, the risk catalysts, like geopolitics and the virus woes, not to forget Brexit, will also be key to watch for fresh direction.