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  • Gold gained some positive traction on Friday and moved away from one-month lows.
  • A subdued USD price action, weaker risk sentiment remained supportive of the uptick.
  • The set-up supports prospects for additional weakness and warrants caution for bulls.

Gold traded with a mild positive bias through the first half of the European session, albeit lacked any follow-through and was seen oscillating in a range just above the $1870 level.

A combination of supporting factors assisted the precious metal to gain some positive traction on the last trading day of the week and move away from one-month lows set in the previous session. The US dollar bulls refrained from placing fresh bets amid the uncertainty over the outcome of the US presidential election. This, in turn, was seen as one of the key factors lending some support to the dollar-denominated commodity.

Apart from this, concerns about the economic fallout from new restrictions to curb the second wave of the coronavirus infections weighed on investors’ sentiment and drove some haven flows towards the XAU/USD. The risk-off mood was evident from a fresh leg down in the US equity futures and reinforced by sliding US Treasury bond yields, which further benefitted the non-yielding yellow metal and remained supportive of the uptick.

Despite the supporting factors, the XAU/USD lacked any strong bullish conviction and remained well within the previous day’s broader trading range. Even from a technical perspective, the overnight fall added credence to this week’s bearish break below 100-day SMA – for the first time since March. This warrants some caution for aggressive bullish traders and positioning for any meaningful near-term appreciating move for the commodity.

Moving ahead, market participants now look forward to the second-tier US economic releases – Core PCE Price Index, Chicago PMI and revised Michigan Consumer Sentiment. The data, along with the broader market risk sentiment, will influence the USD price dynamics and produce some meaningful trading opportunities on the last day of the week.

Technical levels to watch