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  • Dramatic day for gold prices includes a $40 slide to lowest since August 23.  
  • XAU/USD trades at $1520, far from the lows but still under pressure.  

Gold is having the worst performance so far in months even after trimming losses over the last hour. XAU/USD opened the day above $1,550/oz, near multi-year highs and then collapsed to $1,507, the lowest level in almost three weeks.  

Risk appetite and higher US yields

An improvement in market sentiment as trade talks between China and the US appear to be on its way to resume again, reduced the demand for safe-haven assets, like gold and US bonds. The sharp rise in yields added more negative pressure on the yen and gold. The 10-year rose from 1.50% to 1.57%.  

Bonds accelerated the decline after better-than-expected economic reports from the US. The ADP employment report came in at 195K for August, the highest reading in five months. Later, the ISM non-manufacturing surpassed expectations adding strength to the greenback that rose further against “safe-havens” but remained in negative territory versus EUR, GBP, AUD, CAD, and emerging market currencies.  

XAU/USD sharp reversal  

Gold was at one point down $45 for the day. It bottomed at $1,507 before rebounding back above $1,520. Volatility is set to remain elevated until the end of the week.  

A consolidation below $1,520 will point to more losses, exposing the $1,505/10 zone, below the next support is seen around $1,492. On the upside, resistance levels might be located at $1,535 followed by $1,547 and $1,556 (YTD high).