XAUUSD finished yesterday’s trading unchanged amid the lack of top-tier economic reports. Gold prices initially traded higher to $1,480.30 before falling $1,475.84, a mere 32 cents above its opening price.
No-Deal Brexit Fears Weigh Down Sentiment
Political uncertainty has once again enveloped the pound and UK equity markets. Prime Minister Boris Johnson has made the move to keep Parliament from overseeing negotiations for Brexit. He has also submitted a bill to make it illegal for Parliament to vote for an extension on the transition beyond December 2020. These have, in turn, raised concerns that the UK may end up with a no-deal Brexit with could be detrimental to the UK economy.
US-China Phase One Deal Alleviated Risks
It could also be that the phase one deal announced between the US and China on Friday continued to dampen demand for gold. Remember that the US has cancelled additional tariffs on Chinese goods and have rolled back existing levies. China has also agreed to buy up to 200 billion dollars-worth of US goods until 2021.
On the daily chart, you can see that XAUUSD is testing resistance at the falling trend line (from connecting the highs of September 4, October 25, November 1, and December 12). Gold prices have been consolidating at resistance around $1,480.00. XAUUSD will need to close higher than both the trend line and the 100 SMA around $1,490.00. If there are enough buyers, the next resistance level is at $1,1515.20 where gold prices previously made highs on November 1.
On the other hand, a strong bearish candlestick at the trend line could mean that XAUUSD may soon trade to support around $1,458.38. If support at this level does not hold, it may soon test support at the 200 SMA at $1,411.70.