- Gold witnessed a modest pullback from over one-week tops set on Wednesday.
- A strong pickup in the USD demand seemed to be a key factor exerting pressure.
- The risk-off mood, dovish Fed outlook might help limit any sharp corrective slide.
- Acceptance above $1720-22 resistance zone supports prospects for further gains.
Gold held on to its mildly weaker tone through the early European session and was last seen trading just above the $1730 level.
The precious metal struggled to capitalize on the post-FOMC positive move to over one-week tops and witnessed a modest pullback during the early part of Thursday’s trading action. A strong pickup in the US dollar demand turned out to be a key factor exerting some pressure on the dollar-denominated, albeit the early downtick lacked any strong follow-through.
The Fed on Wednesday pledged to maintain the rate unchanged at near-zero levels through 2022 and reiterated to increase the holdings of treasury/MBS at least at the current pace. The US central bank’s commitment to continue with extraordinary policy measures led to a fresh leg down in the US Treasury bond yields and extended some support to the non-yielding yellow metal.
The Federal Reserve also offered a bleak outlook for the US economy, which kept a lid on the recent optimism over a sharp economic recovery and triggered a fresh wave of the global risk-aversion trade. This, in turn, benefitted traditional safe-haven assets and further seemed to have contributed towards limiting the downside for the commodity, at least for the time being.
Even from a technical perspective, the metal has already found acceptance above the $1720-22 key pivotal resistance. The set-up seems tilted firmly in favour of bullish traders and supports prospects for a further near-term appreciating move. Hence, a move towards the $1748-50 intermediate resistance, en-route multi-year tops near the $1765 area, now looks a distinct possibility.
Technical levels to watch
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