Gold Price Analysis: XAU/USD struggles near three-day lows, just above $1700 mark
- A combination of factor prompted some heavy selling around gold on Friday.
- Surging US bond yields revived the USD demand and weighed on the metal.
- A cautious mood helped limit any further losses for the safe-haven XAU/USD.
Gold remained depressed through the mid-European session and was last seen hovering near the lower end of its daily trading range, around the $1700 mark.
The precious metal witnessed some heavy selling on the last trading day of the week and extended the previous day's retracement slide from the $1740 strong horizontal resistance. A sudden spike in the US Treasury bond yields turned out to be one of the key factors driving flows away from the non-yielding yellow metal.
Although Wednesday's softer US CPI report calmed fears about runaway inflation, US Treasuries sold-off again on Friday and pushed the yield on the benchmark 10-year government bond back above 1.6%. Investors remain concerned that massive US fiscal stimulus measures will boost consumer demand and fuel inflation.
Meanwhile, elevated bond yields assisted the US dollar to rebound swiftly from one-week lows. This was seen as another factor that undermined demand for the dollar-denominated commodity. However, a cautious mood around the equity markets extended some support to the safe-haven XAU/USD and helped limit the downside.
Market participants now seemed reluctant to take any risk amid worries that a rout in the US fixed income market could trigger distressed selling in other asset classes. This makes it prudent to wait for some follow-through selling below the $1700 mark before positioning for any further slide for the safe-haven XAU/USD.
Friday's US economic docket features the Produce Price Index and the preliminary Michigan Consumer Sentiment Index. This, along with the US bond yields, might influence the USD and provide some impetus. Traders will further take cues from the broader market risk sentiment in order to grab some short-term trading opportunities around the XAU/USD.
Technical levels to watch