Gold points south following a risk-on rally in stocks

Gold looks vulnerable amid a risk-on rally in global stocks. However, US stimulus hopes are pressuring the dollar, which could cap gold’s losses. Meanwhile, the technical set up points south ahead of the US Jobless Claims, FXStreet’s Dhwani Mehta reports.

Key quotes

“The yellow metal benefited from broad-based US dollar weakness, spurred by the market optimism about a potential US stimulus and dovish FOMC minutes. House Speaker Nancy Pelosi hinted readiness to an airline-support aid in talks with Treasury Secretary Steven Mnuchin after President Donald Trump abandoned stimulus negotiations late Tuesday. However, the upside in the yieldless gold remained limited by the risk-on rally on Wall Street.”

“Markets look forward to the US weekly Jobless Claims data slated for release later on Thursday for fresh updates on the US economic recovery and risk sentiment. In the meantime, gold will continue to trade on the defensive amid an uptick in the US stock futures, with the downside likely to be cushioned by broad dollar weakness. Markets shrug-off an unimpressive, although a civilized US Vice Presidential debate held earlier this morning.”

“Gold is teasing a symmetrical triangle breakdown while flirting with the rising trendline support at $1885. On confirmation of the bearish breakdown, gold could tumble towards the key support at $1860, which is the pattern target.”

“Recapturing the 21-Hourly Moving Average (HMA) at $1887 on a sustained basis is critical to take on the next robust resistance at $1893. That level is the confluence of the 50 and 200-HMAs. Further north, the $1900 level would be back in play.”