Gold attracts fresh sellers amid Fed’s hawkish stance, US-China trade optimism

• Gold struggles to capitalize on its modest uptick amid a mixed fundamental backdrop.
• The Fed’s hawkish stance acts as a tailwind for the USD and weighs on the commodity.
• The US-China trade optimism also contributes to capping gains for the XAU/USD pair.

Gold (XAU/USD) attracts some sellers following an Asian session uptick to the $4,046 area and, for now, seems to have stalled this week’s recovery from its lowest level since October 6. The US Dollar (USD) preserves its strong gains registered over the past two days, to a nearly three-month top, in the wake of the US Federal Reserve’s (Fed) hawkish tilt, which, in turn, is seen undermining the non-yielding yellow metal.

Apart from this, the latest optimism over a de-escalation of trade tensions between the US and China – the world’s two largest economies – turns out to be another factor denting demand for the safe-haven Gold. However, concerns about economic risks stemming from a prolonged US government shutdown might hold back the USD bulls from placing aggressive bets and act as a tailwind for the safe-haven precious metal.

Daily Digest Market Movers: Gold is pressured by Fed’s hawkish tilt and trade optimism

• The US Dollar holds steady near its highest level since early August, touched on Thursday amid the US Federal Reserve’s hawkish tilt, and exerts some pressure on the Gold price during the Asian session on Friday. In fact, Fed Chair Jerome Powell said that a further reduction in the policy rate at the December meeting is not a foregone conclusion.
• A high stakes meeting between US President Donald Trump and his Chinese counterpart Xi Jinping ended on a positive note. The US agreed to cut down tariffs against Chinese goods in exchange for China resuming US soybean purchases and keeping rare earths exports flowing. The optimism turns out to be another factor undermining the commodity.
• The US government shutdown has now entered its fifth week amid a deadlock in Congress on the Republican-backed funding bill, fueling economic concerns. This might hold back the USD bulls from placing aggressive bets, which, along with persistent geopolitical risk, could offer some support to the safe-haven precious metal and help limit further losses.
• Trump said on Thursday that he had ordered the US military to resume nuclear testing immediately. In response, Russia said that if the US resumes nuclear weapons testing it will do so too, sparking fears about a further escalation of the conflict. This, in turn, warrants some caution before positioning for any further depreciating move for the XAU/USD pair.
• In the absence of any relevant market moving economic releases due to the US government closure, traders will scrutinize comments from influential FOMC members for cues about the future rate-cut path. This will drive the USD demand and provide some impetus to the commodity, which remains on track to register gains for the third straight month.

Gold needs to find acceptance above 23.6% Fibo. level to back case for meaningful recovery

The XAU/USD pair did find acceptance above the 23.6% Fibonacci retracement level of the recent corrective decline from the all-time high, though it lacks follow-through and remains below the $4,050 key hurdle. The said area could act as a key pivotal point, above which a fresh bout of short-covering could lift the Gold price beyond the $4,075 region (38.2% Fibo. level), towards the $4,100 mark.

On the flip side, any further weakness could find some support near the $3,950 area ahead of the $3,917-3,916 region and the $3,900 round figure. Some follow-through selling below the $3,886 zone, or an over three-week low touched on Tuesday, could make the Gold price vulnerable to accelerate the fall towards the $3,850-3,845 zone en route to the $3,800 mark and the next relevant supports near the $3,765-3,760 zone.

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