Gold Price Analysis: XAU/USD drops back to $1720 amid risk-on rally in equities

Gold (XAU/USD) reverses its Asian bounce to near 1732 levels and falls back into the red zone in the European session, having hit a new three-day low  |  03/06/2020 08:21
  • XAU bears fight back control in European trading.
  • Risk-on rally in equities offsets broad USD weakness.
  • Next of relevance remains US economic releases.

 Gold (XAU/USD) reverses its Asian bounce to near 1732 levels and falls back into the red zone in the European session, having hit a new three-day low of 1720.83 in the last minutes.

At the time of writing, the spot loses 0.28% to 1722.53, undermined by the risk-on rally in the global equity markets. The latest downtick in the yellow metal could be likely associated with the firmer opening on the European indices, with the pan-European benchmark, the Euro Stoxx posting 1% opening gains.

The increased expectations of additional global stimulus measures combined with the optimism over the prospects of a faster economic recovery are pushing the world equities to three-month highs at the expense of the safe-havens such as Gold and US dollar.

The Japanese government is debated a second coronavirus stimulus package while the European Central Bank (ECB) is widely expected to announce an additional ~EUR500 billion bond-buying when it meets on Thursday.

Despite the ongoing downside bias, the alarming political scenario in the US amid escalating riots in the cities and looming concerns over the virus-induced economic costs will continue to offer some reprieve to the bulls.

Meanwhile, the medium-term bullish bias remains intact in the metal so long as it holds above the critical 1700 figure. Further, in evidence of investors’ confidence in the safe-haven, Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose for a sixth straight session on Tuesday.

Gold: Technical levels to watch

With the renewed weakness, immediate support is seen at 1712.96 (May 29 low). A break below which the 1700 mark will be tested. Alternatively, the next resistances are aligned at 1732.10 (daily high), 1740 (round number) and 1745.12 (June 2 high).

Gold: Additional levels

 

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