- Gold gains traction for the second day in a row on Monday amid political uncertainty in the United States.
- A stronger USD and a positive tone around the stock markets could limit any strong bullish movement.
The gold has moved higher during the European session on Monday and has reached new daily highs, around the region of $ 1,890, although it has lacked a solid continuation.
The precious metal has extended last week’s recovery move, from month-long lows, and gained some traction for the second day in a row on Monday. The growing caution about the outcome of the presidential elections in the United States it has forced investors to hedge their positions, which in turn has been seen as a key factor benefiting gold prices.
Apart of this, concerns about the possible economic consequences of new lockdowns due to coronavirus in western countries they have further boosted some monetary flows towards the safe haven of the precious metal. However, a combination of factors could prevent the bulls from opening aggressive new positions and limiting the strong gains of the XAU / USD.
Global risk appetite received a strong boost on Monday in reaction to China’s upbeat manufacturing PMI.. This has been evident from a strong positive intraday movement in the US stock markets. Apart from this, the prevailing bullish sentiment around the US dollar could limit any significant rise in gold prices, denominated in dollars.
Even from a technical perspective, last week’s break below the 100-day SMA, for the first time since March, favors the bears. Therefore, any subsequent bullish movement could be seen as a selling opportunity and risks disappearing quickly. That said, the drop is likely to remain limited ahead of Tuesday’s US presidential election.
Meanwhile, Monday’s release of the US ISM Manufacturing PMI could generate new momentum. The data, along with developments related to the coronavirus, could influence the dynamics of USD prices and generate some short-term trading opportunities at the start of the American session.
Credits: Forex Street
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