- The underlying bullish tone around the USD exerted some fresh pressure on gold.
- A cautious mood, a modest pullback in the US bond yields extended some support.
Gold edged lower during the Asian session, albeit lacked any follow-through and remained well within the previous day's broader trading range. The commodity was last seen hovering around the $1730 region, down 0.20% for the day.
The precious metal failed to capitalize on the overnight rebound from the $1719 area, or weekly lows and witnessed some fresh selling on the last trading day of the week. The downtick was exclusively sponsored by the underlying bullish sentiment surrounding the US dollar, which tends to undermine the dollar-denominated commodity.
The Fed on Wednesday reiterated that it was in no hurry to raise interest rates at least through 2023. However, investors seem convinced that the rapid pace of improvement in economic conditions would warrant faster normalisation of monetary policy. Moreover, policymakers made no mention of the recent surge in long-term borrowing cost.
This, in turn, kept the US bond yields elevated and assisted the USD to erase the post-FOMC losses. In fact, yields on long-end US government bonds jumped to new cycle highs on Thursday. Apart from this, the prospects for a relatively faster US economic recovery from the pandemic further acted as a major potential tailwind for the greenback.
Meanwhile, another sell-off in the US fixed income market and a slump in crude oil prices raised fears of distressed selling in other asset classes and took its toll on the global risk sentiment. This, coupled with a modest pullback in the US bond yields, extended some support to the non-yielding yellow metal and might help limit deeper losses.
In the absence of any major market-moving economic releases from the US, the US bond yields will continue to play a key role in influencing the USD price dynamics. Traders might further take cues from the broader market risk sentiment to grab some short-term opportunities around the safe-haven XAU/USD.
Technical levels to watch
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