Gold Price Analysis: XAU/USD pulls back below $1,750 as market sentiment sours
- Gold fades recent recovery moves amid risk-off mood.
- S&P 500 Futures extend latest losses, US 10-year Treasury yield stay firm around 14-month top.
- Covid woes, vaccine shortage return to the table while geopolitical tension, reflation worries weigh on the mood.
- Risk catalysts occupy driver’s seat amid a light calendar ahead of Powell’s testimony.
Gold begins the week on a back foot, currently down 0.27% to $1,740, as risk-off mood extends to Monday. Challenges to the risks concerning the coronavirus (COVID-19), fears of liquidity crunch and geopolitics seem to have recently weighed on the stock futures and commodities.
Market pessimism gains momentum…
Weekly open couldn’t defy Friday’s risk aversion, actually magnified, after weekend headlines favor previously downbeat sentiment mainly concerning the Fed and covid.
With the Fed’s verdict to let the Supplementary Leverage Ratio (SLR) concession expire at the end of March, as planned, traders fear liquidity crunch and recall the reflation fears.
Germany’s extension to the virus-led activity restrictions to April and the covid vaccine jitters between the European Union and the UK add to the risk-off mood.
Additionally, the US-China and the Tehran-Washing tussles join Saudi-Iran tension to weigh on the risks. Furthermore, Turkish President Tayyip Erdogan abruptly sacked Turkey's central bank chief on Saturday and added to the risk-aversion.
Against this backdrop, S&P 500 Futures drop 0.20%, down for three consecutive days, whereas the US 10-year Treasury yield and the US dollar index (DXY) keep last week’s upside momentum.
Although a lack of major catalysts on the calendar can disturb gold bears, fears of reflation may join the geopolitical tussles, not to forget the virus woes, to weigh on the yellow metal for a short-term ahead of Fed Chair Jerome Powell’s testimony starting from Tuesday.
Technical analysis
Gold buyers flirt with an 11-week-old resistance line, currently around $1,745. A sustained break above the same becomes necessary before confronting November 2020 lows close to $1,765.