By Barani Krishnan
Investing.com – It was supposed to be gold’s moment. And for a while on Monday, after the announcement of the long-awaited U.S. relief deal on the Covid-19, it was.
Gold bulls got their shot at $1,900 an ounce hours after headlines emerged that rival lawmakers in Congress have agreed on a $900 billion stimulus for the pandemic, the second major bill of its kind after the $3 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act passed in March.
Yet, it was not a shot to the moon for longs in the yellow metal. Right after making a session peak of nearly $1,912, the highest gold futures had gotten to since Nov. 9, the market fell back and spent the day mostly trapped in a tight $10 range of between $1,880 and $1,890.
The pullback was triggered by the rebound in the , which came off near 2-½ year lows as spread of a highly-infectious new strain of the coronavirus in Britain and continued woes over Brexit hit the pound hard. The dollar typically sends gold in the opposite direction.
At Monday’s settlement, on New York’s Comex settled at $1,882.90, down $6.10, or 0.3%. The session high was $1,911.70.
“From a technical perspective, is moving without a clear bias,” analyst Matías Salord said, using the trading symbol for spot gold in a blog posted on FX Live.
“The bias still points to the upside, but for the outlook to improve, it needs to rise back above $1,890. A consolidation above $1,900 would suggest more gains ahead. On the flip side, a decline under $1870 would increase the bearish pressure, exposing the recent low at $1855.”
Ed Moya at New York’s OANDA held a similar view.
“The prospects of more stimulus have been driving gold higher, but today’s short-term dollar surge is disrupting that thesis,” said Moya. “Congress is poised to deliver a second stimulus package today, but that has mostly been priced in for gold.”
“Gold’s bullish trend is still intact but could still be vulnerable if the dollar comeback lasts a couple of days. If risk aversion reasserts itself, the $1,850 level should attract buyers for bullion.”
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