- Risk-off sentiment triggers some hedging shorts around safe-haven gold on Thursday.
- A rally in US bond yields benefits the USD and limits precious metal gains.
- Investors await Fed Chairman Jerome Powell’s speech for a new trade boost.
The oro maintains its modest gains at the start of the European session on Thursday, although lacks a solid follow-up buy. At the time of writing, gold prices are hovering around the $ 1,717 level, up 0.15% on the day.
Having defended the $ 1,700 level the day before, the precious metal managed to regain some positive traction on Thursday. amid weaker sentiment in stock markets. The previous day’s fall in US Treasuries raised fears and affected global risk sentiment. This, in turn, sparked some short hedging around the safe-haven XAU / USD amid mild oversold conditions.
However, a combination of factors has prevented the bulls from opening aggressive new positions and limited the gains of the precious metal. The US bond market has continued to react to the prospects for a relatively faster US economic recovery and a possible rebound in inflation. The reflation trade has generated doubts whether the Fed would maintain ultra-low interest rates for a longer period, which should contain any significant rise in gold prices.
The optimistic US economic outlook has been seen fueled by progress in coronavirus vaccination and a massive US fiscal spending plan. This, coupled with a rally in US bond yields, has extended some support for the US dollar and further affected gold, denominated in dollars. This makes it prudent to wait for some solid continuation buying before confirming that the XAU / USD has bottomed out and positioned for a notable recovery in the near term.
Apart from this, investors also seem reluctant and prefer to wait on the sidelines before Fed Chairman Jerome Powell’s scheduled speech, later during the American session. Powell’s comments on the risk of a rapid rise in long-term borrowing costs will play a key role in influencing the XAU / USD and help investors determine the next short-term move.
Gold technical levels
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