Gold advances to fresh daily highs above $1240
- Gold stages decisive recovery following a 2-day long slide.
- Risk-aversion lifts the precious metal on Monday.
- US Dollar Index stays in the negative territory.
The precious metal continued to gather strength in the second half of the day and rose to its highest level against the dollar at $1244.25 in the last hour. As of writing, the XAU/USD pair was trading at $1243, adding 0.4% on a daily basis.
After suffering losses on Thursday and Friday last week, gold started the new week on a strong note as the metal found demand as a safe-haven. With Brexit uncertainty and concerns over a global economic slowdown weighing on the sentiment on Monday, safer assets such as the CHF, JPY, and gold received interest from market participants. On the same note, major equity indexes in Europe finished the day with large losses and Wall Street opened in the negative territory to confirm the market mood.
Although the Nasdaq Composite erased its early gains to cause the pair to limit its gains, both the Dow Jones Industrial Average and the S&P 500 are staying in the negative territory. Additionally, the 10-year US T-bond yield was last seen down 0.7% on the day.
Later this week, markets' focus will be on the Fed's interest rate decision. Previewing this event, "While we think the Fed’s base case remains that the gradual hiking cycle will continue a bit further, the Fed will probably remove more of its forward guidance to increase its flexibility (as it did in June), as risks to the rate outlook become more two-sided with the Fed funds rate in the broad neutral range," said Danske Bank analysts.
Technical levels to consider
The pair could face the first resistance at $1246 (Dec. 13 high) ahead of $1250 (Dec. 10 high) and $1256 (Jul. 11 high). On the downside, supports are located at $1238 (200-DMA), $1232 (Dec. 14 low) and $1227 (50-DMA).