- Gold witnessed some profit-taking on Friday amid a modest USD short-covering bounce.
- The underlying cautious mood around the equity markets might help limit the downside.
Gold remained depressed through the first half of the European session and was last seen hovering near daily lows, around the $1880 region.
The precious metal edged lower on the last trading day of the week and retreated further from the vicinity of the $1900 mark, or one-month tops touched on Thursday. Given that the US congressional negotiators are yet to agree over a new coronavirus-relief package, the US dollar witnessed some short-covering bounce amid near-term oversold conditions. This, in turn, was seen as one of the key factors that exerted some downward pressure on the dollar-denominated commodity.
Meanwhile, the downside seems cushioned amid the underlying cautious mood around the equity markets, which tends to benefit the safe-haven XAU/USD. Reuters reported that the US is set to add dozens of Chinese companies, including SMIC, to a trade blacklist. Furthermore, Britain and the European Union struck a downbeat tone about the likelihood of a post-Brexit trade deal. The not so optimistic developments weighed on investors’ sentiment and should help limit deeper losses.
Gold, for now, seems to have snapped three consecutive days of the winning streak. However, it will still be prudent to wait for some strong follow-through selling before confirming that this week’s positive move has run out of the steam and positioning for any further downside for gold. There isn’t any market-moving economic data due for release from the US on Friday. This leaves the yellow metal at the mercy of the USD price dynamics and the broader market risk sentiment.
Technical levels to watch
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