Gold Price Analysis: XAU/USD holds steady, flat-lined around $1855 region

Gold seesawed between tepid gains/minor losses through the early European session and was last seen hovering in the neutral territory, around the $185  |  26/01/2021 08:36

• Gold struggled for a firm direction and remained confined in a range on Tuesday.
• A goodish pickup in the USD demand capped any meaningful upside for the metal.
• Weaker risk sentiment, sliding US bond yields extended support to the commodity.

Gold seesawed between tepid gains/minor losses through the early European session and was last seen hovering in the neutral territory, around the $1855 region.

Following the previous day's two-way price moves and an early uptick to the $1862 area on Tuesday, the precious metal witnessed some selling and was pressured by a goodish pickup in the US dollar demand. Doubts over the size and timing of the US stimulus provided a modest lift to the greenback, which, in turn, was seen weighing on the dollar-denominated commodity.

Some prominent Republicans have raised objections on the expensive price tag and pushed back on the idea of passing a $1.9 trillion stimulus package proposed by the US President Joe Biden. Adding to this, Democratic Majority Leader Chuck Schumer further threw the timing into question and said that a comprehensive deal could be four to six weeks away.

Meanwhile, roadblocks to the US stimulus plan comes amid growing worries about the potential economic fallout from the current round of strict coronavirus restrictions. The market concerns resurfaced following the release of disappointing German data on Monday, which raised bets for a double-dip recession in European economies and dampened the market mood.

Apart from this, escalation of US-China tensions in the South China Sea also weighed on investors' sentiment and extended some support to the safe-haven XAU/USD. The lower risk appetite was reinforced by a weaker tone around the US Treasury bond yields, which further collaborated to help limit the downside for the non-yielding yellow metal.

Moreover, investors might also refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of the latest FOMC monetary policy decision on Wednesday. This will be followed by the release of the Advance US Q4 GDP report on Thursday, which should help determine the next leg of a directional move for the XAU/USD.

In the meantime, Tuesday's release of the Conference Board's US Consumer Confidence Index and the US stimulus headlines might influence the USD price dynamics. This, along with developments surrounding the coronavirus saga and the broader market risk sentiment, might assist traders to grab some short-term opportunities around the XAU/USD.

Technical levels to watch