Gold Begins the Week on a Depressed Sentiment

Gold (XAU/USD) traded lower in the early European session on Monday and has fallen to a new one-week low in the Asian session, although bears lacked any follow-through strength.

The yellow metal continued on its decline from the $1933 supply zone and has traded on a depressing sentiment for its third consecutive session today. The decline was mainly a result of the positive uptick surrounding the US dollar (DXY) demand, which often undermines the dollar-denominated commodity.

Meanwhile, investors continue to show concern over the second wave of the Coronavirus infections sweeping across Europe and the US, which could impede the already afflicted global economic recovery. This, coupled with the renewed US stimulus stalemate, has bolstered the USD’s global reserve currency status even further.

However, dwindling hopes for a pre-election fiscal stimulus deal and worries over the imposition of rigorous lockdown measures to reduce the spread of the virus has dampened investors’ sentiment. This, in turn, has given the precious metal a little reprieve.

Moving on, market participants will be looking at the US economic docket today—which features the release of the New Home Sales report—for clues. Additionally, developments around the US fiscal stimulus and the Coronavirus will dictate market sentiment moving forward.

Gold (XAU) Value Forecast — October 26

XAU/USD Major Bias: Sideways

Supply Levels: $1923, $1933, and $1940

Demand Levels: $1900, $1885, and $1876

Gold has been trading on a consolidated bias for the third day running now. Meanwhile, the commodity is struggling to reenter its month-old ascending channel. At press time, gold is getting strongly resisted by the 50 SMA at $1906. A break above that level could help the metal climb back into the channel at $1922. 

However, given the absence of activities in the market on Monday, we could see this consolidation extend and retest the $1885 support.

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