Gold Edges Lower Despite of Weak US Dollar

Receding Brexit fears continues to boost investors’ risk appetite for riskier assets and is seen denting demand for the perceived safe-haven, Gold. The precious metal is seen trading lower for a second consecutive session on Tuesday as the latest polls showed support leaning towards the UK remaining in the European Union.

Gold slide despite of weaker US Dollar

On Monday, the yellow metal lost ground and returned to $1285/80 band as demand remained subdued despite of a sharp sell-off in the greenback, reflecting strong global risk-on sentiment. The metal, however, staged a recovery from session low of $1278 and trimmed most of its intraday losses but still closed 0.69% down around $1289 an ounce as traders seemed reluctant to unwind their long positions in the precious metal on uncertainty over the outcome of the referendum

On Tuesday, stability in global equity market is seen weighing on the safe-haven asset but a weaker US Dollar is limiting any sharp downslide in gold prices. Metal traders turn their focus on the Federal Reserve Chairwoman Janet Yellen’s testimony later during NY trading session. Fed Chair Yellen is due to testify on the Semiannual Monetary Policy Report before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.

Snaps bullish momentum

During the early half of May, gold rallied around 9% from the vicinity of $1200 mark. The initial rally was led by dismal US NFP print that faded prospects of an imminent Fed rate-hike in June/July. The rally gained further traction after the Fed eventually decided to hold its monetary policy stance and was further fueled by increasing uncertainty surrounding the UK-EU referendum that would decide the fate of UK’s membership in the European Union.

However, the yellow metal snapped its winning streak after last week’s killing of a pro-EU MP Jo Cox, which fueled speculations that the incidence might shore-up support for the ‘Remain’ camp. The metal reversed sharply after touching the highest level since August 2014 and is now down around 2.5% from multi-month high level of $1315 touched in the previous week.

Technical outlook

Inability to sustain a strong up-move beyond $1300 mark and a subsequent break below $1277-75 immediate support is likely to extend the near-term corrective move towards 50-DMA support around $1255-50 region. Decisive break below 50-day SMA and a follow through selling pressure below 100-day SMA support near $1240 might now negate possibilities of any further bullish momentum, turning the metal vulnerable to further downside in the near-term.

Meanwhile on the upside, $1292-93 area remains immediate resistance to clear. Only a sustained move above this immediate resistance, leading to an up-move beyond $1300 handle now seems to assist the metal to surpass recent high and dart towards August 2014 monthly highs resistance near $1320-22 area.