- The prevalent upbeat market mood prompted some fresh selling around gold on Monday.
- Bulls seemed rather unimpressed by sustained US selling and hopes for more US stimulus.
- Investors might refrain from placing aggressive bets ahead of this week’s FOMC meeting.
Gold edged lower through the early European session and refreshed daily lows, around the $1832 region in the last hour.
Following the previous session’s two-way price moves, the precious metal witnessed some fresh selling on the first day of a new trading week and was pressured by the prevalent upbeat market mood. The global risk sentiment remained well supported by the optimism over the rollout of COVID-19 vaccines and got an additional boost from an extension of Brexit trade talks.
It is worth recalling that the US Food and Drug Administration (FDA) last week granted an emergency use authorization of the COVID-19 vaccine co-developed by Pfizer and BioNTech. Investors further cheered the news that the UK and the European Union agreed to extend the post-Brexit trade talks beyond Sunday’s deadline in a last-ditch effort to reach a compromise deal.
The risk-on flow was evident from a fresh leg up in the equity markets and a goodish pickup in the US Treasury bond yields, which further drove flows away from the non-yielding yellow metal. Even hopes for additional US fiscal stimulus measures and sustained selling around the US dollar did little to impress bulls or extend any support to the dollar-denominated commodity.
In fact, the USD Index languished near a two-and-half-year low amid growing market worries about the potential economic fallout from the imposition of new coronavirus restrictions in several US states. Meanwhile, a bipartisan $908 billion COVID-19 package could reportedly be split into two to increase its chances of approval by both Democrats and Republicans.
Looking at the broader picture, the XAU/USD remains well within a three-day-old trading range. Investors now seemed reluctant to place any aggressive directional bets ahead of a two-day FOMC monetary policy meeting, starting on Tuesday. This makes it prudent to wait for some strong follow-through selling before positioning for any further depreciating move.