Gold rose gradually on the first day of the week and was last recorded trading near the top end of its daily trading range, located just below the $1,950 zone. The dominant selling bias that surrounds the US dollar currently was seen as a major factor that benefitted the dollar-denominated commodity.
The dollar is under selling pressure amid doubts over the US fiscal stimulus measures. The odds for a major stimulus have dropped almost to zero after Democratic voted to block a Republican bill that might have provided almost $300 billion in new COVID-19 aid.
Additionally, Brexit woes further contributed to the growing uncertainty and extended some support to gold. Nonetheless, renewed hopes over a possible vaccine for the pandemic offered strong boosts tot he global risk sentiment. In turn, it undermined demand for the haven assets and might keep a strong lid on any significant gains for the precious metal.
AstraZeneca said that the resumption of trials for its COVID-19 vaccine candidate will happen sooner than anticipated. Also, Pfizer announced the possibility of presenting late-stage data for its vaccine before the end of October. Apart from that, investors also appeared reluctant to place any aggressive bets; before the two-day FOMC meeting that starts on September 15. The move warrants caution before placing any aggressive bets.
For now, gold seems quite likely to extend its sideways consolidative price action amid the absence of any relevant market moving economic releases from the United States.
The Gold Triangle
The symmetrical triangle that formed in gold seems to look to the Fed meeting midweek. A dovish Fed can easily become a catalyst for the gold bulls to take the precious metal higher from this tech set up. Currently, the Federal Reserve is facing a tricky situation. The United States presidential election is approaching which should result in a ‘stay as we are’ position from the Fed.
Nevertheless, the recent sell-off in the tech stocks will act as a concern if it falls harder. Thus, the Fed may want to step in to offer support to the stocks. One way they can use to do it is to introduce the idea of yield curve control. In the case that the Fed decides to embrace YCC; it will become supportive of the stocks and simultaneously weaken the dollar.