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  • Gold regained positive traction on Thursday and recovered a part of the overnight modest losses.
  • A softer tone surrounding the USD extended some support to the dollar-denominated commodity.
  • The upbeat market mood undermined the safe-haven yellow metal and might cap any strong gains.

Gold traded with a mild positive bias through the first half of the European trading session and was last seen trading near the top end of its daily range, just below the $1900 mark.

The precious metal managed to regain traction on Thursday and recovered a part of the previous day’s modest pullback from a strong support breakpoint, now turned support near the $1902-05 region. The conflicting messages on the next round of the US fiscal stimulus measures kept the US dollar bulls on the defensive and extended some support to the dollar-denominated commodity.

The US Treasury Secretary Steven Mnuchin told reporters on Wednesday that talks with House Speaker Nancy Pelosi made a lot of progress on long-awaited COVID-19 relief legislation. Mnuchin later said on Fox Business News that he would not accept the Democrats’ proposed $2.2 trillion aid package, while Senate Majority Mitch McConnell said that the two sides remain far apart.

Nevertheless, the optimism provided a strong boost to the global risk sentiment. This was evident from the prevalent bullish trading sentiment around the equity markets and might undermine the precious metal’s safe-haven demand. This risk-on mood was further reinforced by a pickup in the US Treasury bond yields, which should cap any further gains for the non-yielding yellow metal.

Investors might also refrain from placing any aggressive bets ahead of Friday’s release of the closely watched US monthly jobs report – popularly known as NFP. This makes it prudent to wait for some strong follow-through buying beyond the $1905 region before traders start positioning for an extension of the recent bounce from 100-day SMA support, around the $1849-48 region.

In the meantime, Thursday’s US macro data will be looked upon for some impetus. The US economic docket features the release of Initial Weekly Jobless Claims, core PCE Price Index and the ISM Manufacturing PMI. The data might influence the USD price dynamics and produce some short-term trading opportunities.

Technical levels to watch