Gold surges to new multi-week tops as tax plan damages market sentiment

• Senate wants to delay tax reduction for corporations to 2019.
• Wall Street retreats sharply as risk-aversion takes over.
• DXY refreshes weekly lows as it plummets toward the 94 mark.

The XAU/USD pair extended its daily gains in the NA session to its highest level since October 20 at $1288 as the initial market reaction to the U.S. Senate Republicans' version of the tax cut plan ramped up the demand for safer assets such as the precious metal. At the moment, the pair is trading at $1286, adding $5, or 0.4%, on the day.

Stocks under pressure on tax proposal

Disappointing news of Republicans planning to delay the highly anticipated tax cut for corporations by one year to 2019 weighed heavily on the major equity indexes in the U.S. As of writing, the Dow Jones Industrial Average and the S&P 500 indexes were both losing nearly 0.8% on the day. Moreover, the 10-year US T-bond yield, which rose more than 1% earlier in the session, retraced its gains to turn flat near 2.315%, supporting the view of investors seeking refuge.

• Senate tax bill to delay corporate tax cut until 2019, dollar to deflate?

Meanwhile, after holding above mid-94s during the first half of the session, the US Dollar Index lost its traction and fell to 94.30 for the first time this week, providing an additional boost to the pair. Amid a lack of fundamental drivers, the trading action is likely to be dominated by the market sentiment.

Technical outlook

With a decisive break above $1291 (Oct. 19 high), the pair could aim for the critical psychological level at $1300 and $1306 (Oct. 16 high). On the downside, supports align at $1275 (Nov. 8 low), $1268 (200-DMA) and $1260 (Oct. 6 low).