Bad news for gold! Next, keep an eye on this key support!

Spot gold continued to hover near $1,930 in Asian trading on Tuesday as the us and China confirmed that their trade representatives had called yesterday to review the first phase of the trade agreement.

Gold futures fell on Monday as optimism over a treatment for COVID-19 pushed global equities sharply higher and gold fell to its lowest settlement price in about a month.

The fall in gold prices came as the US Food and Drug Administration said on Sunday that it had approved the use of convalescent plasma to treat severe coronavirus infections, giving some life to risky assets such as stocks. Convalescent plasma is an antibody-rich blood component that is extracted from recovered COVID-19 patients.

On Monday, the S&P 500 and the Nasdaq Composite rose further to record levels. This has dented demand for precious metals, which have been seen as a hedge against the uncertainty of the COVID-19 pandemic, as well as the trillions of dollars spent by central Banks and governments to limit its adverse impact on companies around the world.

Medical experts say the treatment could benefit people who are struggling with the disease, but there is no conclusive evidence of its effectiveness, and questions remain about when and at what dose.

Gold futures for December delivery fell $7.80, or 0.4%, to $1,939.20 an ounce, the lowest close for the most active contract since July 27, according to FactSet.

Craig Erlam, senior market analyst at Oanda, noted that the dollar recovered earlier losses, which led to lower gold prices on Monday.

“The dollar’s rally has been impressive after breaking through key support last week and today’s rally is an example,” Mr Craig Erlam said on Monday.

The dollar was little changed against six of its rivals when gold futures settled Monday, with the ICE Dollar index edging up 0.01%.

Earlier dollar weakness provided some support for gold early Monday, as the metal climbed above $1970 an ounce at the start of the session.

Erlam said in a market update that the DOLLAR index had moved from “looking vulnerable” to targeting key resistance at 94. That’s bad news for gold in dollar terms.

Saxo Bank commodities strategy Ole Hansen also said that in the short term the gold market was dominated by the dollar. After an unprecedented period of dollar weakness, there will be a correction in the short term.

Lukman Otunuga, senior research analyst at FXTM, said the fall in gold prices over the past two weeks had not been severe because the overall bullish trend was intact. “The failure of the gold market to hold above 1960 suggests a short-term test of the 1930 support level, and if it also falls below that level, then look towards $1,900 / oz, but then there will be a lot of long buying on dips.”

Eugen Weinberg, head of commodities research at Commerzbank, said a consolidation near $1,900 an ounce would lead to a more stable market. “It’s better that some of the weaker bulls get out of the game,” he said. “Gold goes down to make a stronger bottom.”

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