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  • Risk-aversion continues to boost the precious metal.
  • DXY looks to close third straight day with losses.
  • Wall Street starts recovering its losses.

The XAU/USD pair broke above the critical $1200 level and extended its gains in the second half of the day to its highest level since early August at $1220. However, the pair struggled to push higher and was last seen trading at $1219, adding nearly $25, or 2.05%, on the day.

The greenback, which started weaken against its rivals earlier this week, extended its losses as Donald Trump continued to criticise the Fed’s monetary policy by saying that they were too aggressive and were making a big mistake. Furthermore, today’s data from the U.S. showed that the inflation, measured by the core CPI, stayed unchanged at 2.2% on a yearly basis in September to fall short of the market expectation of 2.3%. The US Dollar Index dropped to 95 in the early trading hours of the NA session before going into a consolidation phase and was last seen moving sideways in the 95.15/20 area.

In addition to the USD weakness, the risk-aversion stayed as the main market theme on Thursday to help safe havens such as gold continue to find demand and provided an additional boost to the XAU/USD pair. However, after erasing as much as another 1% earlier in the day, major equity indexes in the U.S. started to recover their losses to limit the pair’s gains. At the moment, the Dow Jones Industrial Average was down 0.4% while the S&P 500 was dropping 0.3%.

“Equities have some real concerns, rising interest rates, trade contention with China, and the natural worry over an aging bull market. But stocks also have enormous profits. The S&P  500 was up 59 percent from its January 2016 low at Wednesday’s open. Yesterday’s plunge was as much about repositioning and profits as it was about tech fears on trade and the possibility of lower growth next year,” FXStreet Senior Analyst Joseph Trevisani said.

Technical levels to consider

On the upside, the initial resistance could be seen at $1220 (Aug. 3 high/daily high), $1228 (Jul. 31 high) and $1234 (Jul. 25 high). Supports, on the other hand, align at $1200 (psychological level), $1194 (50-DMA) and $1185 (Oct. 10 low).