Gold recovers early lost ground to fresh 19-month low, lacks follow-through
| • Near-term oversold conditions triggered some short-covering bounce.
• A modest USD profit-taking remains supportive of the modest rebound.
• Risk recovery/positive US bond yields keep a lid on any further recovery.
Gold quickly reversed an early Asian session keen-jerk fall to $1160 level, fresh 19-month low, and has now turned higher for the day.
Currently trading around the $1177-78 region, testing session tops, the precious metal's sharp rebound from the lowest level since Jan. 2017 could be categorized as a technical bounce amid near-term oversold conditions.
The ongoing US Dollar profit-taking slide, which tends to underpin demand for dollar-denominated commodities - like gold, seems to be one of the key factors prompting some aggressive short-covering move.
However, a slight improvement in investors’ appetite for riskier assets, as depicted by a mildly positive trading sentiment around most European equity markets, weighed on the precious metal's safe-haven appeal.
This coupled with resurgent US Treasury bond yields and prospects for a gradual Fed rate hike path further collaborated towards keeping a lid on any strong follow-through for the non-yielding yellow metal.
Hence, it would now be interesting to see if the commodity is able to build on the recovery move or the uptick turns out to be a dead-cat bounce, against the backdrop of this week's slump of over 4%.
Technical levels to watch
Any subsequent up-move is likely to confront fresh supply near the $1180-81 area, above which the recovery move could further get extended towards $1193 horizontal resistance. On the flip side, $1170 level now seems to protect the immediate downside, which if broken might turn the metal vulnerable to head back towards retesting daily swing lows, around the $1160 region.
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