- Gold attracts some intraday selling at higher levels amid modest dollar strength.
- Aggressive bets on Fed rate hikes and high US bond yields support the dollar.
- Recession fears and risk aversion status could offer support to the safe haven XAU/USD.
The Prayed it struggles to gain significant momentum on Thursday and swings between tepid gains and small losses during the early hours of the American session. The XAU/USD is currently in neutral territory around the $1,715 area as traders wait for a fresh catalyst before positioning for the next leg of a directional move.
The US dollar rises for the second day in a row and looks to ride an overnight bounce from a two-week low, which, in turn, acts as a headwind for dollar-denominated gold. Recent statements by several Fed officials have reinforced market expectations that the US central bank will continue to tighten monetary policy at a faster pace to control inflation. Indeed, markets have been pricing in another 75 basis point Fed rate hike in November, which continues to support elevated US Treasury yields and continues to support the dollar.
Markets, meanwhile, remain concerned about economic headwinds from rapidly rising borrowing costs. Additionally, the risk of a further escalation of the conflict between Russia and Ukraine weighs on global risk sentiment. This is evident in the generally weaker tone in equity markets, which is seen as offering some support to safe haven gold. The mixed fundamental backdrop is preventing traders from making aggressive bets on XAU/USD. Investors also prefer to stay on the sidelines pending monthly US jobs data.
The popularly known NFP report is due out on Friday and will play a key role in influencing short-term dollar price dynamics. This, in turn, should give a significant boost to gold without yield. Meanwhile, US bond yields and speeches from influential FOMC members will boost demand for dollars. Aside from this, the broader market risk sentiment could give the yellow metal some lift and allow traders to take advantage of short-term opportunities.
Technical levels to watch
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
