Gold clings to gains near session tops, above $1950 level

• Gold regained positive traction and recovered a major part of the overnight losses.
• Sustained USD selling extended some support to the dollar-denominated commodity.
• A caution mood around the equity markets further benefitted the safe-haven metal.

Gold traded with a positive bias through the early European session and was last seen trading near the top end of the daily range, just above the $1950 level. A combination of supporting factors assisted the previous metal to regain positive traction on the last trading day of the week and recover a major part of the previous day’s losses to over one-week lows.

The US dollar struggled to capitalize on the post-FOMC short-covering bounce, instead met with some fresh supply following Thursday’s mostly disappointing US macro data. The USD remained depressed through the first half of the trading action on Friday, which, in turn, was seen as a key factor that underpinned the dollar-denominated commodity.

This comes amid concerns about the second wave of coronavirus infections and fading optimism over a sharp V-shaped global economic recovery. Adding to this, a softer risk sentiment – as depicted by the prevalent cautious mood around the equity markets – benefitted traditional safe-haven assets and remained supportive of the bid tone surrounding the precious metal.

Despite the positive move, the commodity remains well within a familiar trading range held over the past one week or so. Moreover, the yellow metal has been struggling to break through a one-month-old descending trend-line resistance. This makes it prudent to wait for some strong follow-through buying before positioning for any further near-term appreciating move.

Market participants now look forward to the release of the Michigan Consumer Sentiment Index for September, scheduled later during the early North American session. The data might influence the USD price dynamics, which, along with the broader market risk sentiment, will be looked upon for some short-term trading opportunities.

Technical levels to watch