• Gold erased nearly $20 this week pressured by risk-on flows.
  • Reports of a partial United States (US)-China trade deal boosted the risk appetite.
  • Markets also seem to be pricing heightened hopes of a Brexit deal.

The troy ounce of the precious metal lost nearly $20 this week as it struggled to find demand as a safe-haven. As of writing, the XAU/USD pair was trading at $1,484, erasing 0.6%, or $9, on a daily basis.

A partial trade deal?

Risk-perception this week remained as the primary driver of the market action. Reports of the United States and China reaching a partial trade deal on Thursday allowed the US Treasury bond yields and global equity indexes rally higher. Although there was no official confirmation of a deal at the time of press, citing sources familiar with talks, Reuters reported that the agreement includes a currency pact and a delay in US tariffs on Chinese goods that were initially planned to go into effect next Tuesday, October 15th.

Brexit optimism

Additionally, heightened hopes of the United Kingdom (UK) and the Europan Union (EU) reaching a Brexit deal ahead of the deadline put additional weight on gold's shoulders. European Council President Donald Tusk on Friday said that he received optimist messages that a deal on Brexit could be reached. 

Furthermore, after briefing the EU 27 on his meeting with British Brexit Secretary Barclay, European Union (EU) Chief Brexit Negotiator Barnier has got the green light from the EU27 for "tunnel negotiations," suggesting that sides will be engaging in intense discussions over the weekend to come up with a deal.

Earlier in the week, the data published by the US Bureau of Labor Statistics (BLS) revealed that the core inflation, as measured by the Consumer Price Index (CPI), stayed unchanged at 2.4% on a yearly basis. In the meantime, the minutes from the Federal Open Market Committee's (FOMC) September 17-18 monetary policy meeting revealed that most policymakers believed that a 25 basis points rate cut was needed citing economic outlook, risk management and inflation objectives. 

Participants will be paying close attention to trade balance data from China to see if the world's second-largest economy is losing momentum. On Friday, retail sales, industrial production, and gross domestic product (GDP) data from China are likely to have an impact on the market sentiment as well. 

Retail sales data from the US and speeches by Federal Reserve officials will also be looked upon for fresh signs regarding the next policy move.

Technical outlook

On the daily chart, the XAU/USD pair is looking to end the week below the 20-day SMA. Additionally, the Relative Strength Index (RSI) on the same chart is edging lower below the 50 mark, suggesting that the bearish momentum is building up in the near-term. 

The pair could face the support at $1,474 (Oct. 11 low) ahead of $1,465 (Sep. 30 low) and $1,455 (Oct. 1 low). On the upside, $1,500 (psychological level/20-day MA) aligns as the initial resistance ahead of $1,516 (Oct. 10 high) and $1,534 (Aug. 13 high).

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