“¢ Persistent USD weakness helps regain positive traction on Wednesday.
“¢ Surging US bond yields/fading safe-haven demand might cap additional gains.
Gold regained some positive traction on Wednesday and is currently trading just above the $1200 mark, near the top end of its three-day-old narrow trading range.
After yesterday’s modest recovery attempt, the US Dollar resumed with its bearish slide and was seen as one of the key factors benefitting dollar-denominated commodities – like gold.
The greenback was hit by the fact that the new US tariffs were set at 10% rather than an outright 25% and China’s retaliatory duties on about $60 billion worth of US goods.
However, the latest US-China trade tariffs now seem to have fueled expectations of rising inflationary pressure in the US economy and the same was evident from the ongoing upsurge in the US Treasury bond yields.
In fact, the benchmark 10-year bond yield rose further beyond the 3.0% mark, hitting its highest level since late May, which coupled with firming Fed rate hike expectations might keep a lid on any runaway rally for the non-yielding yellow metal.
Moreover, a continuous improvement in investors appetite for riskier assets, as depicted by a positive mood across European equity markets and which tends to weigh on the precious metal’s safe-haven status, might further collaborate towards capping gains.
Traders now look forward to the US economic docket, highlighting the release of housing market data, in order to grab some short-term opportunities later during the early North-American session.
Technical levels to watch
Immediate resistance is pegged near the $1208-09 region, above which the commodity is likely to aim towards testing the $1214-15 supply zone. On the flip side, weakness back below the $1200 handle might continue to find support near the $1193-91 region, which if broken might turn the metal vulnerable to slide back towards testing $1185-84 support area.
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