Gold erases more than $10, drops below $1330 on Thursday

  • Greenback gathers strength in the second half of the day.
  • 10-year T-bond yield gains more than 1.5% to weigh on the pair.
  • Wall Street retraces a large portion of early losses.

After touching its highest level in 10-months at $1346.80 on Wednesday, the XAU/USD pair reversed its course today and staged a deep technical correction. As of writing, the pair was losing $11.5, or 0.85%, on the day at $1326.85.

The sharp upsurge witnessed in the US T-bond yields in the second half of the day seems to be the primary driver behind the pair’s recent fall. The 10-year T-bond yield was last up 1.7% on the day at 2.697%, suggesting that investors are not interested in traditional safe-haven assets. Meanwhile, following a negative start to the day, major equity indexes in the U.S. pared their losses and were almost flat on the day as of writing to confirm the improving market sentiment in the session. 

On the other hand, the upsurge in bond yields provided support to the greenback and helped the US Dollar Index to start recovering its weekly losses despite the mixed macroeconomic data releases from the U.S. to further weigh on the pair. At the moment, the DXY is up 0.13% on the day at 96.64.

According to the U.S. Census Bureau, durable goods orders rose 1.2% in December following January’s 1% (revised from 0.7%) growth. Other data from the U.S. showed that the business activity in the service sector continued to expand at a healthy pace in February while the manufacturing sector lost traction. 

Today’s data releases from the U.S.

  • US: Durable goods orders rose 1.2% in December vs 1.5% expected.
  • US: Initial weekly jobless claims decreased by 23,000 to 216,000.
  • Philly Fed Manufacturing Index plummets to -4.1 in February from 17 in January.
  • US: Markit Manufacturing PMI drops to 53.7 in February (preliminary) vs 54.7 expected.
  • US: Existing home sales drop 1.2% in January.

Technical levels to watch for

The initial support for the pair could be seen at $1318 (20-DMA) ahead of $1311 (Feb. 15 low) and $1300 (psychological level). On the upside, resistances are located at $1336 (Apr. 23, 2018, high), $1341 (daily high) and $1347 (Feb. 20 high).

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