The selling pressure comes from a stronger dollar. The USD index is hovering around a two-week high today, rising nearly across the board after a deep sell-off amid Fed’s dovish shift last week. Besides, the yellow metal is pressures by lower liquidity in the markets as Chinese markets are closed for the Lunar New Year holiday this week.
On the other hand, the downside momentum us capped by the lingering worries over slowing global economic growth, the risk of another US government shutdown, Brexit uncertainty and investor cautious tone ahead of another round of US-China trade talks due next week.
The trade negotiations will come into market focus in the days to come, and lack of substantial progress towards a deal could sparkle risk aversion across the global markets. Such scenario will play into gold’s hands. In the short term, however, the downside risks persist. A break below $1300 could fuel a more aggressive profit taking.