Gold prices could rebound to 100-DMA placed at 1215 levels on Friday's NFP

Gold prices wavered around USD 1200 psychological barrier during the European session, mainly driven by a recovery in 10-year US treasury yields which dulls the attractiveness of the yellow metal as an alternative yielding asset. While a persistent strength in the greenback capped upward moves in gold prices. Gold prices are expected trade cautious ahead of ECB meeting which may provide fresh incentives for the precious metal. Gold prices currently trades at 1200.53 levels, -0.10% lower on the day, bouncing-off session lows at 1197.85 levels.

The pair is expected to rebound sharply from current levels and may test 100-DMA at 1215 levels post the release of US non-farm payrolls data due for release tomorrow.

1. Gold resilience to USD strength:
The US dollar extends its upward trajectory and sits at fresh twelve year highs across its major counterparts largely on increased bets of a mid-year rate hike, boosted by a series of latest US macro data. The US dollar index which measures the relative strength of the greenback against a basket of major currencies, trades firmly near multi-year highs at 96.31 levels. The index has gained almost 2.5% over the past one week. In contrast, gold prices have stood resilient losing about -0.50% over the said time. Moreover, a solid recovery in the 10-year treasury yield from sub 2% levels to above 2.1% levels at present, also failed to major impact on gold prices.

2. Gold prices little affected by upbeat US data:
Recent US economic releases including impressive GDP data, manufacturing and services PMI as also upbeat consumer sentiment data failed to drag gold lower below the crucial support of 1190 levels. Prelim GDP printed stronger than market expectations at 2.2% q/q vs. 2.0%. The latest Markit’s manufacturing PMI came in at 55.1, up from 53.9 last month. Also, the ISM non-manufacturing Composite PMI reached to 56.9, better than the expected survey of 56.5, and up from January's 56.7. Moreover, hawkish comments by Fed’s Dudley and Fischer pitching for a rate-hike as early as this summer were also unable to knock-off gold prices lower.

However, it is expected that gold prices may break its consolidation phase and rally on the release of the most anticipated US non-farm payrolls data tomorrow, with the market betting on a figure of 235,000. In January, 257,000 new jobs were added to the US economy.

3. Stabilizing crude oil prices:
Crude oil prices rallied today boosted by the latest comments from Saudi Arabia, ignoring the over-10-million-barrel surge in the US crude inventories. Saudi Arabia's Oil Minister Ali al-Naimi said on Wednesday that oil demand is gradually rising, global economic growth seems more robust and oil prices are stabilizing. Moreover, US Crude prices seem to have formed a support zone around USD 50 levels and continue to hold firmly above that level. Hence, it seems that crude has found a bottomed and leaves room for more upside. Gold prices remain supported as rising oil prices boost demand for the yellow metal as a hedge against oil-led inflation.

4. China downgrades GDP forecasts:
The safe-haven bids for gold were further boosted after Chinese officials downgraded the annual economic growth target to "about 7%" growth this year, instead of last year's 7.5% target today after undershooting last year's target amid a slowing property market. The Chinese downgrade underscores the fragile state of global economic, supporting the demand for gold as a safe-haven asset.

Technically, Gold prices have bounced-off crucial trend line support at 1190-1195 levels seen on the daily chart on several occasions and currently trades well above that level. To the upside, gold prices are likely to test 100-DMA located at 1215 beyond a break of 5-DMA and 10-DMA confluence at 1205 levels post NFP release. On the flip side, a surprise to the downside may drag the pair lower to 1180 (Jan 2015 Lows) levels and below that doors would open for a retest of 1167 levels.