Gold remains on the defensive, around $1945 area

• Gold edged lower on Friday amid optimism over the US economic recovery and COVID-19 vaccine.
• A combination of factors extended some support and helped limit any deeper losses, at least for now.
• Investors now look forward to a crucial weekend meeting between the US and Chinese trade officials.

Gold extended its sideways consolidative price action through the early North American session and remained confined in a range, around the $1945 region.

The precious metal struggled to capitalize on its goodish rebound from the $1862-63 region, or three-week lows set on Wednesday and witnessed some selling on the last trading day of the week. The downtick was sponsored by emerging signs of the US economic recovery and the optimism over a potential vaccine for the highly contagious coronavirus diseases.

However, the emergence of some fresh selling around the US dollar helped limit any deeper losses for the dollar-denominated commodity, at least for now. The USD bulls remained on the defensive amid the uncertainty over the next round of the US fiscal stimulus measures and failed to gain any respite from Friday’s mixed US Retail Sales figures.

Apart from a weaker greenback, a turnaround in the global risk sentiment – as depicted by a fall in the equity markets – further underpinned the precious metal’s safe-haven demand. The anti-risk flow was reinforced by a weaker tone surrounding the US Treasury bond yields, which extended some additional support to the non-yielding yellow metal.

Despite the supporting factors, the commodity lacked any strong bullish conviction as investors now seemed reluctant to place any aggressive bets ahead of a crucial weekend meeting between the US and Chinese trade official. Hence, it will be prudent to wait for a sustained move in either direction before positioning for any meaningful trading opportunities.

Technical levels to watch