Gold recovers modestly from daily lows, stays in red near $1285

• Gold falls sharply on improving risk sentiment.
• USD weakness helps XAU/USD rebound.
• Gold remains on track to close third straight week higher.

After finding resistance a little below the critical $1300 mark earlier in the day, the precious metal started to erase this week's gains and extended its slide in the first half of the NA session. Following a sharp drop to $1276, the XAU/USD pair has gone into a consolidation phase and was last seen trading at $1284, where it was down nearly $10 on the day. Despite today's fall, however, the pair remains on track to record gains for the third straight week.

Earlier today, a combination of a stronger greenback and an improved market sentiment weighed on the pair. With the U.S. Bureau of Labor Statistics reporting an impressive growth in December nonfarm payrolls and a higher-than-expected rise in the annual wage inflation, the US Dollar Index rose all the way up to 96.60. Furthermore, cheering the upbeat data and the positive developments surrounding the U.S. - China trade conflict, major equity indexes in the U.S. started the day decisively higher to further weigh on the safe-haven gold.

However, FOMC Chairman Powell's cautious comments about the economic outlook and his dovish message today forced the greenback to lose its traction. As of writing, the DXY was down 0.08% on the day at 96.20.

• Fed's Powell: Always prepared to shift policy stance.
• Fed's Powell: Will revisit balance sheet program if reductions cause problems in markets.

Technical levels to consider