Gold Price Analysis: XAU/USD rally stalls below $1,740/45 resistance area

• Gold rally loses strength after hitting resistance at $1,740/45.
• XAU/USD turns negative on the day despite the increasing demand for safe assets.
• Longer-term, gold remains in a consolidation phase between $1,680 and $1,740/45.

The XAU/USD is on track to end its three-day rally from $1,670 lows last week after failing to break resistance at $1,740/45 area. The precious metal has been unable to extend gains beyond the top of the last three weeks’ trading range and has turned negative on the day, ticking down to $1,730.

Gold futures have failed to take advantage of the negative market sentiment on the back of the downbeat economic perspectives released by the Fed and a vulnerable US dollar amid growing fears of a second COVID-19 wave in the US. The upside attempt seen in the late European session has been rejected at $ 1,745.

The Federal Reserve dampened hopes of a fast economic recovery and confirmed that interest rates will remain near zero for the foreseeable future which hammered the risk rally observed over the previous three weeks. Furthermore, reports of an increase of COVID-19 cases on some US states have increased concerns that the second wave of infections might thwart the economic recovery, which has boosted demand for safe assets.

Gold prices consolidate near long-term highs

The daily chart shows the XAU/USD consolidating roughly between $1,680 and $1,740/45 after having rallied more than 15% from the mid-March lows at $1,452.

On the upside, gold futures remain capped below the mentioned $1,749/45 (April 24, June 2 highs) which is closing the path towards May 20 high at $1,754 and then the long-term high at $1,765. On the downside, the pair has found support on the 100-SMA on the 4-hour chart, at $1,720, and below there, Jun 10 low at $1,708 and June 3, May 11 lows at $1,690.

XAU/USD daily chart

XAU/USD key levels to watch