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  • Gold prices pull back from a two-week low of $1,693.78.
  • The escalation in the trade/political tension between the US and China keeps the safe-haven positive.
  • Increasing odds of Quantitative Easing (QE) at the Fed offers additional support to the recovery.
  • US data, risk catalysts will be the key for near-term direction.

Gold prices bounce off 12-day low to $1,712.10, up 0.16% on a day, during Thursday’s Asian session. In doing so, the bullion defies the previous three-day decline while taking clues from the US-China tension and hopes of Fed’s QE.

The US policymakers at the House of Representatives recently passed a bill to levy sanctions on the Chinese diplomats involved in violating the human rights in Xinjiang. The move is different from US President Donald Trump’s signal to levy sanctions on China by the week’s end.

While China hasn’t yet offered clues as to how it will react to the US bill, it certainly will blast as the Trump administration is close to few more sanctions on Hong Kong and China. The reason is US Secretary of State Mike Pompeo’s comments suggesting Hong Kong’s “no autonomous” status from China, which in turn can take back the nation’s special trading privilege.

On the other hand, the New York Fed President Bill Williams mentioned that the Fed is thinking very hard about yield curve control (like the RBA), saying that it could be a tool that complements other policies.

The market’s risk barometers seem to ignore the fears of US-China tussle as the US 10-year Treasury yields gain 1.5 basis points (bps) to 0.692% whereas Japan’s NIKKEI gains 1.41% to 1,720 as we write.

Even if a light calendar in Asian keeps the risk catalysts on the driver’s seat, US GDP, Durable Goods Orders and Weekly Jobless Claims could entertain markets during the US session and hence are worth following.

Technical analysis

The bullion’s pullback from a five-week-old ascending trend line, at $1,694 now, challenges a 21-day SMA level around $1,716. Though, a falling resistance line from May 18, currently at $1,726, will be important to watch afterward.