The dollar’s pullback in the latter half of this week has given bullion bugs a rare opportunity to peak out from behind the curtains to push spot gold off its two-year low.
The precious metal is now trading back within the mid-$1600 region, as prices recovered from “oversold” conditions, with its 14-day relative strength index moving back above the 30 threshold.
However, the precious metal remains firmly in the downtrend that has persisted since March and is still on course for a second consecutive quarterly loss - its longest such streak since mid-2018.
As long as dollar bulls keep the greenback elevated while maintaining their appetite for further gains, that should ensure gold’s upside remains firmly capped.
Gold’s next big move may be triggered by next week’s US jobs report, whereby continued resilience demonstrated in the labour market may force the Fed’s hand into pushing US rates even higher.
If markets further price in the prospects of a 75-basis point hike in November, such an ultra-hawkish outlook may see spot gold unwind its recent gains.
However, signs of deterioration in US hiring may offer further relief for bullion prices.
Spot gold’s 21-day simple moving average, which currently lies close to $1680, is set to offer immediate resistance while the psychologically-important $1700 level lies slightly further north.