Gold Price Analysis: XAU/USD consolidates biggest losses in a month below $1,850

• Gold prices struggle to recover from two-week low.
• Risk catalysts await fresh clues to extend previous optimism, US dollar strength.
• China’s Caixin Services PMI, US stimulus talks and market chatters be the key.

Gold picks up bids around $1,839 during the initial Asian session on Wednesday. The yellow metal marked the heaviest drop since early January while testing the lowest in two weeks the previous day as the US dollar strength broke key support line. While the economic calendar was mostly silent, an absence of market frenzy and increasing hopes of the US stimulus seemed to have helped the greenback, which in turn weighed on the bullion prices.

USD gains recall gold sellers…

Despite looming uncertainty over the much-awaited US relief package and retail rush to certain equities and commodities, which has been receding off-late, gold prices dropped the previous day as the US dollar benefited from upbeat fundamentals at home. Not only progressive talks over the stimulus, Democratic push for a budget resolution that allows them to pass the fiscal help without Republican support also favor the hopes concerning the US aid package. Additionally, the latest comments from US Treasury Secretary Janet Yellen also suggests that economic relief is desperately needed.

It’s worth mentioning that the downbeat European fundamentals and expectations of upbeat US economics under the Democratic leadership also propelled the US dollar index (DXY) to the two-month top. Though, recent haggling among the US policymakers and a lack of major catalysts seem to offer breathing space to the gold sellers.

Not only gold but S&P 500 Futures also look for fresh clues around 3,830 despite its Wall Street counterpart’s 1.39% gains for Tuesday.

Moving on, China’s Caixin Services PMI for January, expected 51.1 versus 56.3, can offer intermediate moves to gold prices as recent data from the dragon nation have been downbeat and any further weakness could favor the US dollar’s safe-haven demand. However, major attention will be given to the risk catalysts like the coronavirus (COVID-19) updates and US aid package news for fresh impulse.

Technical analysis

Unless bouncing back beyond the previous support line from January 18, at $1,849 now, gold prices are less likely to convince the buyers. Hence, the previous month’s bottom surrounding $1,802 seems to lure the yellow metal sellers.