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As political concerns continued to provide a minimal support on the strength of the US currency against the Asian currencies, the yellow metal was seen plummeting from the previous session. Coming from the recent one-month peak, gold was struggling to keep the bullish momentum due to the reluctance of the investors to put their bets on the safe haven assets. Will the tone change for the yellow metal?

Inverse Relationship

The inverse relationship between the gold and the US dollar reflects on the current mess that the metal is in right now. Apparently, the US dollar has been boosted by the visit of the US Vice President Mike Pence to the Asian countries affected by the missile attempt of North Korea, securing the stand of the US government on this political tension.

At the time of writing, the US dollar advanced 0.11 percent to 109.02 against the Japanese yen. The Australian dollar also lost 0.50 percent to 0.7552 against the greenback after the Reserve Bank of Australia decided to keep the its official cash rate at a record low of 1.5 percent.

However, the gains of the dollar could only be limited as the US economic data might take the currency back at the bottom. The US government could provide steadiness on the political division, but the surprising drop of the New York area manufacturing data couldn’t deny the probability of an upcoming economic uncertainty. In case negative sentiment emerges these coming days, expect a change of rhythm between the greenback and the gold.

Also, the US Dollar Index remained volatile at 100.19. The US 5-year yield, 30-year yield and 10-year yield slid 0.64 percent, 0.41 percent and 0.49 percent respectively, while the US 2-year yield was found flat as of 10:29 UTC.

XAU/USD Movement

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In a wider perspective, the yellow metal was still in its bullish area despite the previous declines. Gold was away from its January lows at 1145.00 levels. On Monday’s session, the pair slumped from 1289.00 levels to 1284.00 levels.

Few hours after the Tuesday’s session opened, gold prices at the Commodity Exchange plummeted 0.46 percent to $1,285.90 per troy ounce for June delivery. XAU/USD was trading above its 50-day SMA of 1267.92 and was hitting its 20-day SMA of 1284.02, expressing grip on the previous uptrend.

In light of the trend of the pair last week, the yellow metal was far from plunging further. The figures were tight and there was no firm indication of the total downfall of the gold. Fundamentally, the investors will likely remain cautious in the coming days and may be skeptical on their trading decisions. Thus, the upward momentum on dollar won’t be sustained and the market will turn volatile. As fluctuations may occur, the yellow metal could find a breather and may keep its stand at the bullish area.

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