Gold is trading mostly in a recovery mode this week, with the price is getting closer to challenging the 200-DMA at $1,307 once again. The metal closed above the $1,300 threshold yesterday, which open the way to further rebound in the short term. On Thursday, gold is up 0.30% on the day so far.
The reason behind a better tone around the precious metal is the local dollar weakness which came amid a spectacular euro recovery due to easing political tensions in Italy. Weaker-than-expected US GDP and ADP employment data also added to the bearish pressure on the buck which remains on the defensive today.
Against this backdrop, the metal has a chance to confirm the recovery, should the greenback proceed with its bearish bias. This scenario could be implemented if the dollar remains under pressure and accelerates the retreat, should the US PCE index come in lower than expected. However, in the longer term, the yellow metal remains vulnerable to downside risks.
By Helen Rush
Senior Analyst at Capital Markets