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· Gold prices remained under pressure on Friday, following a 2%drop in the previous session, as robust U.S. data encouraged a return to riskier assets and hit demand for safe-haven bullion.
Spot gold was down 0.3% at $1,514.90 per ounce as of 0419 GMT. Prices fell to $1,509.03 on Thursday, their lowest since Aug. 23, following upbeat private payrolls and services industry data from the United States.
· The declines put gold on pace for its second straight week of losses. U.S. gold futures slid 0.1% to $1,524 per ounce.
· “Thursday’s data was positive, causing gold prices to reduce. We now expect a lot of volatility in the gold markets,” said Brian Lan, managing director at dealer GoldSilver Central in Singapore.
· Traders now await the monthly U.S. payrolls report due at 1230GMT for the next snapshot on the labor market’s health.
· Risk appetite was also whetted by news that the United States and China had agreed to hold high-level talks early in October that fueled optimism for substantial progress in de-escalating the long, bitter trade conflict between the two.
Gold has jumped about 18% this year as the bruising trade war has sparked fears of a global economic slowdown and encouraged interest rate cuts by major central banks around the world.
· “Gold is still seen as a safe haven asset. A correction is bound to happen.” GoldSilver Central’s Lan said.
· MSCI’s broadest index of Asia-Pacific shares outside Japan added0.2%, putting it on track for a 2% weekly gain — which would make it the best week since mid-June.
· Spot gold may test support at $1,496 per ounce, a break below which could cause a further fall to $1,453, according to Reuters technical analyst Wang Tao.
Gold is trading in a sideways manner around $1,520 in Asia, having dropped 2.14% on Thursday, the biggest single-day drop since Nov.11, 2016.
Further, the haven demand has weakened, courtesy of renewed US-China trade optimism and the resulting rally in the US stocks. The S&P500 index to its highest level since the end of July Thursday.
All-in-all, Gold risks falling back to the two-week low of $1,506 hit yesterday and could extend the decline to $1,500.
Technical charts are biased bearish
Thursday's 2.14% drop validated the bearish divergence of the relative strength index. The moving average convergence divergence histogram is also reporting bearish conditions with a below-zero print. Further, the5- and 10-day moving averages have produced a bearish crossover.
So, a drop to $1,492 (Aug. 22 low) could be in the offing in the short-term.
· Other precious metals dipped along with gold, with silver down0.7% at $18.50 per ounce, after slumping 4.8% in the previous session to $18.48.
The metal, which on Wednesday hit its highest since September 2016, remained on track to end the week higher
· Palladium fell 0.8% to $1,546.85, dropping after three straight days of gains, while platinum declined 1.6% to $943.02.
Reference: Reuters, FX Street