- Gold edges lower on Friday and erodes a part of the overnight gains to a one-month high.
- A modest USD strength turns out to be a key factor exerting some pressure on the metal.
- Recession fears, geopolitical tensions should limit losses ahead of the key US NFP report.
Gold attracts some sellers on Friday and erodes a part of the previous day’s strong move up to the $1,795 region, or a one-month high. The XAU/USD remains depressed around the $1,785 zone through the first half of the European session and for now, seems to have snapped a two-day winning streak.
The US dollar regains some positive traction on the last day of the week, which is turning out to be a key factor exerting some downward pressure on the dollar-denominated gold. The modest USD uptick, meanwhile, could be attributed to some repositioning trade ahead of the closely-watched US monthly jobs data, due for release later during the early North American session.
In the meantime, subdued action around the US bond markets is likely to act as a headwind for the USD and lend support to the non-yielding yellow metal. Despite hawkish remarks by several Fed officials this week, investors continue pushing back against the idea of a larger rate hike at the September FOMC meeting. This, in turn, has been weighing on the US bond yields.
Apart from this, growing recession fears, along with China-Taiwan tensions over US House Speaker Nancy Pelosi’s visit to the island, should limit the downside for the safe-haven gold. In fact, China on Thursday conducted missile strikes in the Taiwan Strait. The five missiles landed within Japan’s exclusive economic zone and raises tensions in the region.
Investors might also refrain from placing aggressive bets and prefer to wait for a fresh catalyst from the US NFP report. The data will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to gold. This makes it prudent to wait for strong follow-through selling before confirming that the XAU/USD has topped out.
Technical levels to watch