Gold spikes to session tops near $1600 mark, stronger USD capping gains

• Gold reversed an early dip to over one-week lows and turned higher for the day.
• The safe-haven precious metal benefitted from the global risk-aversion trade.
• Resurgent USD demand might turn out to be a key factor that might cap gains.

Gold built on its steady intraday bounce from over one-week lows and spiked to fresh session tops, around the $1600 round-figure mark in the last hour.

The precious metal quickly reversed an early Asian session dip to levels below the $1570 region, rather caught some fresh bids and recovered a part of the previous session's sharp intraday slide amid reviving safe-haven demand.

Concerns that broader lockdowns across the world – to fight the coronavirus pandemic – will take its toll on the global economy continued weighing on investors' sentiment and the same was evident from a fresh wave of the risk-aversion trade.

The global flight to the safety provided a goodish lift to traditional safe-haven assets and the same was further reinforced by a fresh leg down in the US Treasury bond yields, which eventually boosted demand for the non-yielding yellow metal.

Meanwhile, a strong pickup in the US dollar demand did little to hinder the intraday positive move, albeit might turn out to be the only factor that might keep a lid on any runaway rally for the dollar-denominated commodity, at least for now.

The greenback remained well supported by its status as the global reserve currency amid mounting fears over the economic fallout from the coronavirus pandemic, despite the recent efforts by central banks and governments across the world.

It is worth reporting that the Fed on Tuesday announced a temporary facility to support the smooth functioning of the financial markets, which allows foreign central banks to exchange their holdings of the US Treasuries for overnight dollar loans.
It will now be interesting to see if bulls are able to capitalize on the momentum or the commodity meets with some fresh supply at higher levels. Market participants now look forward to the release of the US ISM Manufacturing PMI for a fresh trading impetus.

Technical levels to watch