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  • Gold extended the previous day’s retracement slide from near two-week tops.
  • A modest USD strength, risk-on mood exerted some pressure on the commodity.
  • Expectations of lower interest rates in the US might help limit any deeper losses.

Gold traded with a mild negative bias through the early North American session and was last seen trading near the lower end of its daily trading range, just below the $1960 level.

The precious metal witnessed some selling through the early part of the trading action on Wednesday and extended the overnight retracement slide from near two-week tops. The downtick was sponsored by a combination of factors – a modest US dollar strength and the prevalent upbeat market mood.

The better-than-expected release of the US ISM Manufacturing PMI on Tuesday, which improved to 56 in August from 54.2, helped revive hopes for the economic recovery. This, in turn, stemmed the recent USD bearish momentum and was seen as one of the key factors weighing on the dollar-denominated commodity.

The greenback was further supported by a goodish pickup in the US Treasury bond yields. This, coupled with the risk-on mood further undermined the precious metal’s safe-haven demand. However, expectations that the Fed will keep rates lower for longer helped limit losses for the non-yielding yellow metal.

It is worth recalling that the Fed Chair Jerome Powell announced a new policy framework at the Jackson Hole Symposium last week. Powell made it clear that the US central bank is willing to tolerate above-target inflation for some time to support the labor market and economic recovery.

The commodity has now dropped back closer to weekly lows, though it will be prudent to wait for some strong follow-through selling before positioning for any further depreciating move. Market participants now look forward to the release of the US ADP report for some trading impetus.

Meanwhile, the key focus will remain on the closely watched US monthly jobs report, scheduled for release on Friday. The NFP print will now play a key role in determining the next leg of a directional move the metal.

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