Gold struggles to recover, trades at multi-week lows near $1285

• US Dollar Index surges on Monday.
• European equity indexes started the week on a high note.

The XAU/USD pair lost more than $15 on Friday and closed the week below the critical $1300 mark for the first time since late January. Although the pair opened with a bullish gap, it failed to retake $1300 and reversed its course to extend its slide to the lowest level since January 25 at $1285. As of writing, the pair is trading at $1286, losing a little over $7 on the day.

The broad-based USD strength on Monday remains as the primary driver of the pair’s price action. Ahead of the ISM-NY Business Conditions Index and construction spending data from the U.S., which are unlikely to trigger a sharp reaction from the markets, the US Dollar Index is staying at its highest level in more than a week above 96.60, adding more than 0.2% on the day.

Additionally, the positive market sentiment today weighs on the precious metal. Hopes of the U.S. and China reaching a trade deal toward the end of the month help stock markets post gains on Monday. Just recently,  Kevin Hassett, chair of the White House Council of Economic Advisers, said that a trade deal could be finished “sometime soon.” Reflecting the positive mood, the S&P 500 Futures is adding 0.3% to hint at a positive start in Wall Street.

In the remainder of the day, the risk perception and the USD’s valuation could continue to impact gold’s price in the absence of significant macroeconomic data releases. More importantly, unless we see a daily close above $1300, the pair’s recovery attempts are likely to be assessed as a technical correction.

Key levels to watch for