During Tuesday’s Asian trading session, the yellow metal price succeeded in stopping its downward rally of the previous day, drawing some modest bids around the $1,800 level, as the mounting worries over the economic fallout from the fast-spreading Delta variant of the coronavirus weighed on the market trading sentiment. This tends to underpin the safe-haven GOLD prices.

The intensifying tension in the relationship between the US and China put some additional pressure on the market trading sentiment, which led to further gains in the safe-haven metal, gold. The tussle between the two financial giants escalated further after China stated that there is still an impasse in US-Sino relations. In addition to this, the selling bias surrounding the dollar, triggered by multiple factors, was seen as another critical factor that is providing additional support to the dollar-denominated commodity, (gold).

Worries over the economic slowdown, due to the fast-spreading Delta variant of the coronavirus, keep weighing on the market trading bias. This was evident from the selling bias surrounding the equity markets, which is seen as a key factor that is underpinning the safe-haven gold. New South Wales, Australia, has recorded a non-stop surge in new COVID-19 cases. Australia could extend lockdown restrictions, as weekend protests in the country’s largest cities have fueled concerns about new infections.

Apart from this, the US seems unable to control the pandemic, resulting in an extension of restrictions. This is why the global market sentiment failed to stop its overnight downtrend, remaining sour during the second half of the Asian session. However, the reason for this could also be associated with the escalating US-China tussle, which is not showing any signs of slowing down, as China says there is a standstill in terms of US-Sino relations.

In a scheduled meeting with US Deputy Secretary of State Wendy Sherman, Chinese Vice Foreign Minister Xie Feng said that the deadlock in US-Sino relations was due to some people in America treating Beijing as an “imaginary enemy.” Foreign Minister Xie urged the United States to change its “extremely negative mindset and extremely dangerous China policy. Furthermore, the negative appearance of the US stocks futures tends to highlight the risk-off sentiment, which is beneficial for the dollar-denominated commodity, gold.

Despite the downbeat market sentiment, the broad-based US dollar failed to extend its positive performance of the previous-day, dropping just below recent peaks, amid a cautious sentiment ahead of the Federal Reserve meeting. The Fed’s monetary policy meeting will play an essential role in influencing the movement of the US dollar, and provide gold with a fresh directional impetus. Therefore, the declines in the US dollar were seen as one of the critical factors that helped the gold prices to stay bid, as the price of gold is negatively correlated to the price of the US dollar.

Moving on, the market traders will keep their eyes on this week’s key event – the FOMC meeting, that kicks off today. Meanwhile, the developments surrounding the coronavirus saga and the passing of President Joe Biden’s infrastructure spending, will continue to play a key role in the direction of gold.