- Gold climbs higher during the early American session and updates one-month highs.
- Geopolitical tensions, recession fears, declining US bond yields and dollar weakness offer some support.
- Signs of stability in financial markets act as a headwind ahead of Friday’s NFP report.
Gold dipped a bit from the one-month highs reached during the first hour of the North American session and fell back below the $1,780 level in the last hour. The XAU/USDhowever, maintains its positive tone for the second consecutive day and trades with gains of almost 0.70% on the day.
Investors remain concerned about the slowdown in the global economy, which, coupled with increased military threats from China, continues to act as a tailwind for gold, which is a safe haven. China is carrying out the largest military maneuvers in its history around Taiwan, in retaliation for the visit of the president of the US House of Representatives, Nancy Pelosi, to the island. On Thursday, China said it had carried out “precision missile strikes” in the Taiwan Strait as part of its military exercises. The five missiles fired by China fell within Japan’s exclusive economic zone and are raising tensions in the region.
Aside from this, modest US dollar weakness turns out to be another factor underpinning dollar-denominated gold. Despite more aggressive comments from several Fed officials this week, investors have balked at the idea of a further rate hike at the September FOMC meeting. This is evident in the softer tone in equity markets, keeping dollar bulls on the defensive and lending some support to the underperforming yellow metal. That said, signs of stability in equity markets limit any advances for the commodity, at least for now.
Investors also seem reluctant to make aggressive bets, preferring to wait for a further catalyst from the closely watched monthly US jobs data. The popularly known NFP is due to be released on Friday and will play a key role in influencing short-term dollar price dynamics. Additionally, geopolitics coupled with overall market risk sentiment will help traders determine the next leg of a directional move for gold.
Technical levels
Source: Fx Street
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