Gold (XAUUSD) dipped from two-week highs as focus shifted to equities as coronavirus fears cool off. On the other hand, Copper came under pressure in early Wednesday trading session after rallying to four-month highs on Tuesday. Gold underperformance amidst a weakened dollar is a point of concern.
Gold under Pressure
The precious metal has struggled to power through the $1750 level and remains range bound opting to seesaw between $1700 and $1750 level.
Tuesday sell-off from highs of $1743 to lows of $1724 came as focus shifted towards equities. U.S equity continued to race higher ignoring more than one week of riots that threatens to disrupt economic recovery from the COVID-19 pandemic.
While people are increasingly investing in U.S. equities amidst an ongoing recovery from March sell-off, they are also maintaining close watch to the Bullion. This explains why the precious metal has found support above the $1700 an ounce level.
However, the precious metal has struggled to capitalize on weakness in the U.S dollar. The greenback has continued to weaken against a basket of other major currencies in the wake of violent protests following the brutal murder of George Floyd.
Looking ahead, the Non-Farm Payroll will have a significant impact on the dollar and, conversely, influence XAU/USD direction of trade heading into Friday. In the near term, traders await to see if the outcome of the NFP will affect the monetary policy outlook by the Federal Reserve.
On the other hand, copper continues to climb higher as traders react to the opening of economic activity around the world. China’s factory activity picking up should continue to fuel demand for the red metal that accrues strong demand.
China is the world’s largest metal consumer, of which a positive factory outlook goes a long way in driving metal prices higher. Likewise, copper prices look set to continue powering high as factories in China come back online in the aftermath of the COVID-19 pandemic.