Gold Price Consolidates On Coronavirus Vaccine Doubts & Weaker USD
Gold price action on the XAUUSD, hitherto under pressure as risk-on sentiment took hold of the markets last week, has bounced back into a consolidation range as divergent data leaves the markets struggling for direction.
On Monday, gold prices dropped 0.56% as news emerged that Moderna Pharmaceutical’s coronavirus vaccine candidate had produced encouraging results in clinical trials. However, claims of insufficient data regarding the trials have cast doubts as to the efficacy of the vaccine candidate.
Furthermore, dismal homebuilding data from the US Census Bureau have put the greenback on the back foot, causing it to weaken broadly across several assets. Vital data such as the FOMC minutes and yet another speech by the US Fed Chair Jerome Powell coming up tomorrow have led traders to hold off on aggressive positioning until further guidance for the USD is obtained.
A combination of these factors leaves gold price struggling for direction and trading within a defined range.
Gold price activity on the XAUUSD broke above the symmetrical triangle to hit multi-year highs, on Friday last week but has since then failed to gain sufficient bullish momentum. The 1753.29 resistance has so far held brilliantly, but so has the support at 1722.30. These two price levels mark the ceiling and floor of the price action for the past week.
Further weakening of the US Dollar and return of safe-haven flight could push the XAUUSD above the 1753.29 ceiling, which brings the 1764.98 price level (May 18 peak) into focus as the immediate resistance. Above this level, further price targets lie at 1792.26, 1802.83 and 1823.98, all previous highs seen close to a decade ago.
On the flip side, breakdown of the floor could occur on the return of risky sentiment, which brings 1722.30, 1699.17 into focus. 1680.24 and 1658.89 remain viable downside targets if positive coronavirus-related news hits the markets. The US Flash Manufacturing PMI data may also have a say as far as gold price action for the week is concerned.