- Optimism over global economic recovery dragged gold to multi-month lows on Friday.
- A softer risk tone, subdued USD demand extended some support and helped limit losses.
Gold recovered a major part of its early lost ground to seven-month lows and was last seen trading with only modest losses, just above the $1770 level.
Following the previous day’s directionless/two-way price moves, the precious metal witnessed some selling during the Asian session on Friday and dropped to the lowest level since July 2020. Investors remained optimistic about a strong global economic recovery amid the impressive pace of coronavirus vaccinations and the slowing pace of infections.
Apart from this, progress on the US President Joe Biden’s proposed $1.9 trillion stimulus package has been fueling expectations for a possible acceleration in inflation. This, in turn, held the US Treasury bond yields near one-year tops set earlier this week, which was seen as a key factor that drove some flows away from the non-yielding yellow metal.
That said, a softer risk tone – as depicted by a modest pullback in the equity markets – extended some support to the safe-haven XAU/USD. Apart from this, a subdued US dollar demand assisted the dollar-denominated commodity to stage a modest recovery from the $1760 region. This, in turn, warrants some caution before positioning for any further downfall.
Market participants now look forward to the US economic docket, highlighting the release of flash PMI prints (Manufacturing and Services) and Existing Home Sales. This, along with the US bond yields, might influence the USD price dynamics. Traders might further take cues from the broader market risk sentiment to grab some short-term opportunities on the last day of the week.
Technical levels to watch
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