Gold Price Analysis: XAU/USD slumps toward $1,710 on improving risk sentiment

• Gold is struggling to find demand as risk flows start to dominate markets.
• US Dollar Index clings to small daily gains above 97.00.
• Wall Street looks to open in the positive territory.

After spending the first half of the day moving sideways above $1,720, the troy ounce of the precious metal started to weaken ahead of the American session. As of writing, the XAU/USD pair was trading at $1,714, losing 0.75% on a daily basis.

Will the risk rally continue?

Improving risk sentiment seems to be weighing on safe-haven gold on Wednesday. German biotech firm CureVac announced on Wednesday that they could have their coronavirus vaccine on the market in mid-2021. Moreover, Germany's Cabinet approved the extra budget to finance the stimulus package and provided an additional boost to the risk-on flows.

Reflecting the upbeat market mood, major European equity indexes are rising between 0.5% and 0.7% on the day. In the meantime, the S&P 500 futures are up 0.45%, suggesting that Wall Street is looking to open in the positive territory.

Building Permits and Housing Starts will be featured in the US economic docket on Wednesday. Nevertheless, investors are unlikely to react to these data. More importantly, Jerome Powell, Chairman of the Federal Reserve System, will be testifying before the Senate on the second day of the semiannual monetary policy report. Ahead of these events, the US Dollar Index is clinging to small daily gains above 97.00, allowing the bearish pressure to remain intact.

Technical levels to watch for