Gold Price Analysis: XAU/USD bulls take a breather after biggest daily gain since Jan. 4

• Gold trades near $1,870 in Asia, having jumped 1.7% on Wednesday. 
• Expectations for bigger US fiscal stimulus push inflation expectations higher.

Gold is consolidating on Wednesday's gains, with investors expecting that the new US President Joe Biden would boost stimulus to counter the coronavirus-induced economic slowdown. 

The yellow metal is trading in a sideways manner below $1,870 per ounce at press time, having rallied by 1.7% on Wednesday. That was the biggest single-day percentage gain since Jan.4.

Having unveiled a $1.9 trillion stimulus plan last week, Biden's circle of advisors is now focused on delivering a follow-up package focused on two interrelated issues: climate and infrastructure.

Inflation expectations have already risen to multi-year highs above the Federal Reserve's 2% target, strengthening the case for investing in gold and could rise further with investors expecting bigger stimulus. 

From a technical analysis perspective, Wednesday's gain has confirmed a reversal higher signaled by the long tail attached to the Jan. 18 candle. As such, the metal could test the 100-day Simple Moving Average (SMA), currently at $1,884. 

Further gains, however, could remain elusive if the US Treasury yields track inflation expectations higher, putting a bid under the US dollar, gold's biggest nemesis. The 10-year Treasury yield is currently sidelined near 1.07%. 

Technical levels