Good morning, traders.

During Tuesday’s Asian trading session, the yellow metal prices succeeded in gaining some positive traction and edged higher around above the $1,690 level. The reason could be traced to easing reflation fears after U.S. House Speaker Nancy Pelosi recently told that the fiscal stimulus worth $1.9 trillion will be out by Wednesday, versus widely expected Tuesday. On the other hand, the escalating US-China tussle lends some additional support to the safe-haven yellow metal. Meanwhile, the rest of the COVID-19 fears also probe gold’s bears.

The U.S. $1.9 trillion COVID-19 aid package boosted the market trading sentiment, which became the key factor that kept the lid on any additional gold gains. Besides, the stronger U.S. dollar is another major factor that’s keeping gold prices lower as it’s inversely correlated with the currency. The yellow metal prices are currently trading at 1,690.95 and consolidating in the range between 1,680.32 – 1,691.67.

Currently, gold is still trading under pressure as U.S. stock futures tend to highlight the risk-on sentiment. The stock market’s positive performance is supported by the optimism surrounding the coronavirus (COVID-19) aid package. With the U.S. Senate’s passage of President Joe Biden’s $1.9 trillion COVID-19 relief bill, the much-awaited stimulus is now only two steps away from reaching U.S. citizens, which in turn, helped equities to stay upbeat.

The latest optimistic data from Japan also played a significant role in underpinning the market trading sentiment. The positive tone around the market sentiment is capping the gains in the gold prices. Japan released data on the day, which showed that the GDP rose 2.8% quarter-on-quarter in the 4th-quarter of 2020, lower than both the 3% growth in forecasts and the 3rd-quarter’s 5.3% growth. Meanwhile, the GDP grew 11.7% year-on-year, also lower than the forecast 12.7% growth and the 3rd-quarter’s 22.9% growth.

Despite the risk-on mood, the broad-based U.S. dollar extended its previous session’s winning streak and took some further bids on the day after the bond yields got a boost. The sentiments that the U.S. economic recovery from COVID-19 is expected to come faster than expected is another factor supporting the dollar and driving flows away from the non-yielding yellow metal. The yields could rise further, ahead of a $120 billion auction of 3, 10, and 30-year Treasuries later in the week.

Elsewhere, the uptick in GOLD prices could be attributed to the long-lasting concerns over the coronavirus (COVID-19) and tussles between the U.S. and China. Besides this, the recent attacks on Saudi Arabian oil facilities are also weighing on the investor sentiment and extending some support to the traditional safe-haven XAU/USD, helping to limit deeper losses. In the absence of the major data/events on the day, the market traders will keep their eyes on chatters concerning vaccinations and economic recovery. Meanwhile, the risk catalyst and the U.S. dollar moves will also be key to watch.

Daily Trading Levels

Support and Resistance
S1 1624.39
S2 1657.22
S3 1670.37
Pivot Point 1690.04
R1 1703.19
R2 1722.87
R3 1755.69

Bearish bias continues to dominate gold as it trades at 1,689 level. On the lower side, gold is likely to find support at 1,671 level and a resistance level of 1,690 and 1,710. The RSI and MACD support a selling bias, while the series of EMA are suggesting further sellings below 1,710 today. Bearish bias dominates below 1690.04 and bullish over 1690.04 level. Good luck!