Gold Price Analysis: XAU/USD flirts with session lows, below $1880 level

• Gold failed to preserve modest intraday gains and edged lower during the early European session.
• The prevalent upbeat market mood was seen as a key factor weighing on the safe-haven metal.
• The heavily offered tone surrounding the USD might help limit deeper losses for the commodity.

Gold witnessed some selling during the early European session and has now retreated to the lower end of its daily trading range, just below the $1880 level.

The precious metal struggled to capitalize on its early uptick, instead witnessed some selling near the $1886-87 region amid the prevalent upbeat market mood. The already strong global risk sentiment got an additional boost after UK regulators approved the use of the AstraZeneca/Oxford coronavirus vaccine.

Apart from this, hopes for additional US financial aid and growing bets on a strong global economic recovery in 2021 remained supportive of the risk-on environment. This, in turn, was seen as one of the key factors that undermined demand for traditional safe-haven assets and prompted some selling around the XAU/USD.

That said, the heavily offered tone surrounding the US dollar might extend some support to the dollar-denominated commodity and help limit any deeper losses. The USD failed to gain respite after Senate Majority Leader Mitch McConnell on Tuesday blocked the measure to raise the COVID-19 relief payments to $2,000.

Even from a technical perspective, the XAU/USD, so far, has managed to hold its neck above a one-month-old ascending trend-line support. This further makes it prudent to wait for some strong follow-through selling before trades start positioning for any further depreciating move amid year-end thin trading volumes.

Market participants now look forward to second-tier US economic data – Goods Trade Balance, Chicago PMI and Pending Home Sales – for some impetus. The data might influence the USD price dynamics. This, along with the broader market risk sentiment, might produce some short-term opportunities around the XAU/USD.

Technical levels to watch