- Gold gains traction for the second successive day on Thursday amid modest USD weakness.
- Retreating US bond yields seem to weigh on the USD and lend support to the commodity.
- The prospects for a further policy tightening by the Fed could cap ahead of the NFP on Friday.
Gold builds on the previous day’s modest move up and gains some follow-through traction for the second successive day on Thursday. The steady intraday ascent extends through the early European session and lifts the XAU/USD to a fresh daily high, around the $1,774-$1,775 region.
Growing worries about a global economic slowdown, along with heightened US-China tensions caused by US House Speaker Nancy Pelosi’s Taiwan trip, continue to act as a tailwind for gold. Apart from this, the emergence of some selling around the US dollar offers additional support to the dollar-denominated commodity. Despite more hawkish comments by FOMC members, the USD has been struggling to capitalize on this week’s goodish bounce from its lowest level since July 5 amid retreating US Treasury bond yields.
That said, the prospects for a further policy tightening by the Fed could hold back bulls from placing aggressive bets around the non-yielding gold. In fact, several Federal Reserve officials hinted this week more interest rates are coming in the near term. This, along with the recent recovery in the global equity markets, could further contribute to capping gains for the safe-haven XAU/USD. Investors might also prefer to move on the sidelines ahead of the release of closely-watched US monthly employment details.
The popularly known NFP report is scheduled for release on Friday and will play an important role in influencing the USD price dynamics. This, in turn, would act as a fresh catalyst, which should allow traders to determine the near-term trajectory for gold. In the meantime, traders on Thursday would take cues from the Bank of England monetary policy decision. Later during the early North American session, the usual US Weekly Jobless Claims data could produce some trading opportunities around the XAU/USD.
Technical levels to watch