Gold fails to hold above $1,550 despite broad USD weakness

• US T-bond yield recovery picks up momentum on Thursday.
• Wall Street’s main indexes look  to open sharply higher.
• US Dollar Index edges lower for third straight day.

The troy ounce of the precious metal rose to its highest level since April 2013 at $1,557 on Wednesday supported by the ongoing USD sell-off. However, with the market sentiment continuing to improve, the XAU/USD pair lost its traction and is now correcting this week’s upsurge. As of writing, the pair was down $10, or 0.65%, on the day at $1,542.50.

The disappointing macroeconomic data releases from the US earlier this week caused recession worries to resurface and weighed on the Greenback as investors started to price a decisive policy action by the Federal Reserve later this month. Following a rally to its highest level in more than two years, the US Dollar Index made a sharp U-turn and closed the last three days in the negative territory.  

Ahead of the Automatic Data Processing’s (ADP) monthly private sector employment report and the Services PMI data releases by the IHS Markit and the Institue for Supply Management (ISM), the US Dollar Index is down 0.2% on the day at 98.20.

Upbeat market mood weighs on precious metal

Despite the bearish pressure surrounding the USD, however, the pair turned south on Thursday with the risk sentiment turning positive and not allowing safe-havens to preserve their strength. Easing worries over a global economic slowdown following this week’s upbeat data from China brought back the risk-appetite into the markets. The 10-year US Treasury bond yield gained traction and closed the day in the positive territory yesterday to confirm the upbeat mood and is now adding nearly 3% on the day.

Additionally, the S&P 500 Futures is up 0.85% on the day to suggest that Wall Street is likely to open the day sharply higher, which is likely to help risk-on flows continue to dominate the market action in the second half of the day.

Technical levels to watch for