Gold Remains in Consolidation as Traders Move to the Sidelines

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Gold (XAU/USD) climbed higher in the early European session and has formed a new top around the $1950 area.

After a brief consolidation phase in the early Asian session on Monday, the yellow metal appears to have found decent traction following the emergence of some selling pressure around the US dollar (DXY).

The prevailing political stalemate over the next round of the US fiscal stimulus, coupled with worries about the US economic recovery kept the dollar bulls in a defensive mode which bolstered the dollar-denominated commodity. Additionally, the negative tone covering the US Treasury bond yields lent extra support to the non-yielding precious metal.

However, the uptick failed to produce any significant follow-through rally as gold continued trading within its days-old consolidation range. Despite the bolstering factors, bulls do not seem to be excited and further gains appear capped for the time being.

Meanwhile, the global risk sentiment got a decent bounce amid new developments of a potential treatment for the highly-infectious Coronavirus disease. The US FDA gave an emergency “green light” to the use of blood plasma from patients who have recovered from the virus to treat other infected patients. This has put some serious pressure on the demand for safe-haven assets including gold.

Furthermore, investors might remain on the sidelines ahead of the Fed Chair Jerome Powell’s speech at the Jackson Hole symposium later this week. That said, it is advisable to wait for a break and close above the $1960 mark before executing any trade positions.

Gold (XAU) Value Forecast — August 24

XAU/USD Major Bias: Sideways

Supply Levels: $1960, $1983, and $2000

Demand Levels: $1939, $1923, and $1900

Gold has been in a consolidation range between $1956 and $1924 since last week Thursday and is still struggling to break out of it. That said, the key level to look out for in the near term for traders is the $1,956 (Friday’s high). A break and close above this line could send gold soaring to the $1983 pivot region again (purple area) fairly quickly.

On the flip side, bears are keenly watching the $1924 level. A break and close below that line could trigger a sell-rush, which could send gold below the $1900 mark again.

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