Gold rises to fresh 5-day high above $1230 on broad-based USD weakness

• USD sell-off on Thursday lifts the XAU/USD pair above $1230.
• US Dollar Index turns negative for the week below 96.50.
• Wall Street’s performance hints at an improved market sentiment.

With the greenback staying under a heavy bearish pressure on Thursday, the XAU/USD pair erased all of the losses it suffered since the start of the week and broke above the $1230 mark. After touching a 5-day high at $1237 in the last hour, the pair started to consolidate its gains and was last seen trading at $1234, where it was up an impressive $20, or 1.6%, on the day.

The technical correction that followed the rally that lifted the US Dollar Index to a fresh 2018 high picked up the pace in the second half of the day as the macroeconomic data releases from the United States failed to pull investors back to the USD.

The IHS Markit’s final Manufacturing PMI for October came in at 55.7 to miss the analysts’ estimate of 55.9. Commenting on the report,  “The key area of concern remained tariffs, which were
widely reported to have contributed to another month of stalled export sales and a steep rise in prices for many inputs,”  Chris Williamson, Chief Business Economist at IHS Markit said. Additionally, the ISM’s Manufacturing PMI fell to 57.7 in October from 59.8 in September to reveal that the sector has lost some growth momentum. Ahead of tomorrow’s  important NFP data, the US Dollar Index is down 0.85% on the day at 96.30.

Despite the USD weakness, however, the upbeat market sentiment in the session made it difficult for the precious metal to continue to find demand. Rising optimism around a possible trade deal between the U.S. and China provided a boost to Wall Street on Thursday and the Nasdaq Composite and the S&P 500 were last seen adding 1.2% and 0.8% on a daily basis, respectively.

Technical levels to consider

The initial resistance for the pair aligns at $1237 (daily high) ahead of $1243 (Oct. 26 high) and $1250 (psychological level). On the downside, supports are located at $1225 (Oct. 29 low), $1215 (daily low) and $1208 (50-DMA).