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  • The prevalent risk-on mood undermined the commodity’s safe-haven status.
  • Fed rate cut expectations/subdued USD demand does little to lend any support.
  • The downside seems limited amid US holiday and ahead of Friday’s NFP report.

Gold prices edged lower on Thursday and dropped back closer to the previous session swing low, around the $1413 region.

Tracking the overnight solid gains on Wall Street – with all the three major indices posting record closing highs, Asian stocks advanced on Thursday and turned out to be one of the key factors undermining the precious metal’s relative safe-haven demand.

The incoming softer US economic data – Wednesday’s ADP report and ISM non-manufacturing PMI being the latest, reinforced market expectations that the Fed will eventually move to cut interest rates this month and boosted investors’ appetite for perceived riskier assets – like equities.  

However, a subdued US Dollar demand might extend some support to the dollar-denominated commodity. This coupled with the recent slump in the US Treasury bond yields to more than 2-1/2 year lows might further collaborate towards limiting the downside for the non-yielding yellow metal.

Hence, it would be prudent to wait for a strong follow-through selling before confirming that the commodity might have already topped out near the $1440 region and positioning for any further near-term corrective slide as the focus now shifts to Friday’s closely watched US monthly jobs report (NFP).

Technical levels to watch