Gold has been volatile in recent weeks as uncertainty dominates the global markets over the efficacy of various COVID vaccines. XAU/USD reversed an intraday dip to the $1867-66 zone and may now be heading back towards the top end of its daily trading range.
The precious metal was last seen hovering around the $1877-83 zone, up at least0.10% for the day. The discovery of a new coronavirus strain dubbed ‘COVID-20’ and the imposition of strict lockdowns and travel restrictions in the United Kingdom may continue benefitting the US dollar’s status as the global reserve currency.
That, in turn, was seen as a major factor that exerted some significant pressure on the dollar-denominated yellow metal. Notably, the USD stood firm after the US GDP print for Q3 2021 was revised higher indicating that the economy expanded by 33.4% annualized pace compared to 33.1% that was estimated earlier.
Having said that, the approval of the anticipated US stimulus package kept a cap on any more gains for the dollar. The US Congress also passed the long-awaited $892 billion COVID aid stimulus package on December 21, together with $1.4 trillion measures to keep the federal government funded for another year.
Currently, that bill is under review by the Senate and will soon become law after it gets passed and signed by the US President Donald Trump. Adding to that, a weaker tone that has developed around the US Treasury bond yields enabled the non-yielding yellow metal to attract some considerable buying.
Nonetheless, it remains to be seen if the precious metal can capitalize on the move or continue with its increasing struggle to gain acceptance above the $1900 mark.
The release of the Conference Board’s Consumer Confidence Index, Richmond Manufacturing Index, and Existing Home Sales might not provide a meaningful effect on the gold market since the primary focus remains on the developments that surround the COVID saga.