Gold falls back to $ 1520 amid resurgent USD demand

• Gold pares gains as US dollar index regains poise amid US-China trade woes.
• Risk-off market profile helps cushion the downside in Gold.
• US Labor Day holiday-led trading could exaggerate Gold’s moves.

Fresh bids emerged just below the 1520 level over the last hour, allowing a tepid recovery in Gold. However, resurgent US dollar demand across the board could keep a lid on the recovery.

US-China new tariffs led risk-off powers the USD

Amid persisting risk-off trades, driven by intensifying disorderly Brexit fears and the new round of tariffs imposed by the US and China on each other’s imports, the safe-haven appeal of the US dollar remains underpinned, in turn weighing negatively on the USD-denominated gold.  

Further, in evidence of decreased confidence in gold, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.23% to 878.31 tonnes on Friday. 

However, the yellow metal continues to derive support from the softer risk tone induced weakness in the Treasury yields and global equities while upbeat Chinese Caixin Manufacturing PMI data also helps keep the downside limited. Note that China is the world’s top gold consumer.

From a broader perspective, the traditional safe-haven gold will continue to remain in demand amid US-China trade escalation and heightened fears over a global economic downturn.  

In the day ahead, the USD price-action will play a key role in gold trades while any fresh developments on the trade front will be closely watched amid light trading.

Gold Technical levels to watch