Yesterday, the precious metal, gold, closed at 1,859.88, after placing a high of 1,884.18, and a low of 1,858.87. Gold prices dropped for the third consecutive day on Tuesday, amid the fears over a new coronavirus variant in the United Kingdom, which gave the US dollar a boost. 

The new mutant of the coronavirus that first appeared in the United Kingdom and has been reported by the top UK Health official as “out of control” urged the UK government to impose stricter national restrictions in an effort to contain the virus. The new mutant was reportedly much more infectious than the usual form; however, it has not been proven that it is any more dangerous than the original virus. 

Reports suggested that this new coronavirus variant could spread almost 70% faster than the original one, which is why the number of infections in the United Kingdom rose to the highest record levels in just a few days. Given the circumstances, all European countries and 40 other nations around the world imposed a travel ban on incoming flights from the UK, which added to the existing fears of global economic recovery. The rising fears raised the appeal for safe-havens, ultimately adding strength to the greenback, as investors preferred the US dollar over the yellow metal in this regard. The rising demand for the US dollar added further pressure to the gold prices, and they remained in negative territory for the 3rd consecutive day on Tuesday. 

On the other hand, US lawmakers have approved a $ 900 billion relief package for the world’s biggest economy, which will provide a long-sought boost for millions of American people and businesses battered by the coronavirus pandemic. The Democrats and the Republicans approved the bill in the Senate, and the House of Representatives cleared the way for legislation to be sent to President Donald Trump to be signed into force. The rising number of coronavirus cases in the US has further threatened the economy, causing Democrats and Republicans to finally reach a deal over the bill after months of negotiations and disagreements. However, the impact of such aid always hurts the local currency, and the US dollar came under pressure after this news, which ultimately capped further losses in the yellow metal on Tuesday.

On the data front, at 18:30 GMT, the Final Gross Domestic Product for the third quarter came in, showing a rise to 33.4% against the projected 33.1%, supporting the US dollar and ultimately putting pressure on the gold prices. At 18:32 GMT, the quarter’s final GDP Price Index came in in. It was in line with the expectations of 3.5%. At 19:59GMT, the Richmond Manufacturing Index for December for the US was released, indicating a rise to 19, against the expected 11, which boosted the US dollar and added to the losses in the yellow metal prices. At 20:00 GMT, the CB Consumer Confidence figures for December showed a drop to 88.6, against the estimated 97.1, weighing on the US dollar. The Existing Home Sales for November came in line with the forecasted 6.70M. Due to strong macroeconomic data, the US dollar, that was already high onboard, gathered further strength and weighed heavily on the yellow metal prices on Tuesday.

Meanwhile, the losses in the gold prices were limited because of the rising demand for safe-havens, after the relationship between the US and China came into the headlines once again. The US State Department issued additional visa restrictions on Chinese officials suspected of human rights abuses. On Monday, Secretary of State Mike Pompeo said that the visa restrictions affect Chinese officials whom the US believes are responsible for or complicit in repressing religious and spiritual practitioners, members of ethnic minority groups, dissidents, human rights defenders, journalists and others.

Pompeo said that the United States has made it clear that perpetrators of human rights abuses are not welcome in the country. He said that the family members of the targeted individuals could also face visa restrictions. These restrictions added to the dispute between the US & China and raised the safe-haven appeal, limiting the losses for the yellow metal on Tuesday.

Daily Technical Levels

Support               Resistance

1,858.49              1,884.19

1,848.22              1,899.62

1,832.79              1,909.89

Pivot Point:        1,873.92

Gold is trading in a narrow trading range between 1,884 and 1,874, and violation of this range to the lower side could extend the selling trend until the 1,862 level. Simultaneously, a bullish breakout at the 1,884 resistance level could extend buying until the next target level of 1,895 today. The idea is to sell below 1,872 and only to buy above 1,885. At the same time, choppy trading can be expected between 1,872 and 1,885 today. Good luck!