• XAU/USD dives to four-month lows at $1,830.
  • Gold accelerates its downtrend amid broad USD strength.
  • XAU/USD: Confirmation below $1,850 might increase bearish pressure.
     

Gold futures have finally broken support at $1,850 on Monday, plunging to fresh four-month lows at $1,830 amid a broadly stronger US dollar. XAU/USD has managed to find buyers at the mentioned $1,830 although it remains about 1.6% lower on the day.

Gold suffers amid broad USD strength

The yellow metal has accelerated its downtrend from last week highs at $1,900 amid a positive market sentiment after news of AstraZeneca’s vaccine and a stronger US dollar, buoyed by upbeat US macroeconomic figures.

The pharmaceutical giant AstraZeneca has boosted investor’s optimism in Monday, reporting that their COVID-19 vaccine, developed together with the University of Oxford, is 90% effective. This is the third vaccine reporting promising test results, which feeds hopes that the cure for the pandemic that is devastating the global economy could be available over the next months.

In the US, the preliminary Markit Manufacturing PMI survey has shown a larger than expected expansion of private sector activity, which has contributed to increasing demand for the USD. Both manufacturing and services sectors have posted figures well beyond expectations, revealing that US economic activity has been resilient to the COVID-19 impact.

XAU/USD: Breach of $1,850 adds bearish pressure

From a technical point of view, a confirmation below of $1,850 (late-September lows) might attract bears to push the pair lower. On the downside, below intra-day low at $1,830, next areas of interest would be $1,795 (mid-July lows) and $1,760, the 50% Fibonacci Retracement of the March – July rally.

On the upside, the pair should regain $1,850 to shrug off downside pressure and aim towards $1,900 and $1,910 psychological level 100-day SMA. Once above here, the next target would be $1,960/75 (November 9, September 16 highs).

Technical levels to watch