Gold traded with a mild negative bias through the early European session and was last seen hovering near daily lows, around the $1850 region.
The precious metal struggled to capitalize on the previous session’s bounce from the $1837 region, instead witnessed some selling on the first day of a new trading week. The downtick marked the third consecutive day of a negative move and was sponsored by the underlying bullish sentiment, which tends to undermine demand for the safe-haven XAU/USD.
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Despite growing market worries about the potential economic fallout from the ever-increasing COVID-19 cases, hopes for US financial aid remained supportive of the upbeat market mood. It is worth recalling that investors have been pricing in the prospects for a $1.9 trillion fiscal stimulus plan to help revive the US economy under Joe Biden’s presidency.
Meanwhile, the likelihood of more aggressive fiscal spending in 2021, coupled with the risk-on flow pushed the US Treasury bond yields higher. This was seen as another factor weighing on the non-yielding yellow metal. That said, a weaker US dollar extended some support to the dollar-denominated commodity and helped limit deeper losses, at least for now.
In the absence of any major market-moving economic releases from the US, the broader market risk sentiment might continue to play a dominant role in influencing the gold. This makes it prudent to wait for some follow-through selling before confirming that the recent bounce from the vicinity of the $1800 mark might have already run out of the steam.