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Gold retreats below $1290 as Wall Street gains traction

  • Stocks turn north following a mixed start to the day.
  • Positive market mood weighs on the precious metal.
  • US Dollar Index stays in the negative territory below 96.

Although the XAU/USD pair continued to climb toward the critical $1300 mark, it lost its momentum in the second half of the day and gave back a majority of its daily gains. As of writing, the pair was trading at $1288, still up around $3.5 on a daily basis.

The improved market sentiment in the NA session seems to be the primary driver of the pair's price action. With major equity indexes in the U.S. building on last Friday's impressive gains, the precious metal struggled to find as a safe-haven. At the moment, both the S&P 500 and the Nasdaq Composite are adding around 1% on the day while the Dow Jones Industrial Average is gaining 0.7%.

On the other hand, the greenback continues to suffer losses against its major rivals on Monday as the disappointing PMI data from the U.S. and Fed chief Powell's dovish shift keep investors away from the currency. The US Dollar Index was last down 0.5% on the day at 95.72.

Earlier today, the ISM reported that the Non-Manufacturing PMI edged down to 57.6 in December from 60.7 in November and fell short of the market expectation of 59. "The non-manufacturing sector’s growth rate cooled off in December. Respondents indicate that there still is concern about tariffs, despite the hold on increases by the U.S. and China," the ISM noted in its publication.

Technical levels to consider

The initial support for the pair aligns at $1282 (daily low) ahead of $1276 (Jan. 4 low) and $1270 (20-DMA). On the upside, resistances are located at $1295 (daily high), $1300 (psychological level) and $1309 (Jun. 14, 2018, high).

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