Gold drops below $1230 ahead of US PMI data
- Broad-based USD strength drives XAU/USD on Wednesday.
- European equity indices rebound to suggest an improved sentiment.
- Coming up: Markit Services & Manufacturing PMI and speeches by FOMC members.
After advancing to its highest level since mid-July near $1240 on Tuesday, the XAU/USD pair reversed its course on Wednesday and slumped to a session low of $1225. As of writing, the pair was trading at $1229, losing a little more than $1 on the day.
A broad-based USD strength seems to be the primary reason behind the pair's dismal performance today. The US Dollar Index, which tracks the greenback against a basket of six major currencies, rose to its highest level in more than two months at 96.53 as the selling pressure surrounding European currencies ramped up the demand for the greenback. Later in the session, the IHS Markit will publish its flash PMI data for both the manufacturing and the service sectors of the U.S. Furthermore, FOMC members Bullard, Bostic, and Mester are scheduled to deliver speeches.
In the meantime, an improved market sentiment as reflected by the sharp rebound witnessed in global equity indexes weigh on traditional safe-havens such as the gold on Wednesday. If we see a similar action in Wall Street today, the pair is likely to extend its losses.
Technical levels to consider
The pair could encounter the first resistance at $1233 (daily high) ahead of $1240 (Oct. 24 high) and $1248 (Jul. 12 high). On the downside, supports align at $1222 (Oct. 24 low), $1215 (Oct. 12 low) and $1204 (50-DMA).