Gold on the defensive, below $1870 level amid stronger USD

Gold lacked any firm directional bias and seesawed between tepid gains/minor losses, around the $1865-70 region through the early European session.

The XAU/USD failed to capitalize on the previous day's modest rebound from two-month lows and witnessed a subdued/range-bounce price action on the last trading day of the week. Investors remain concerned that the second wave of coronavirus infections could threaten the economic recovery, which, in turn, continued benefitting the US dollar's status as the global reserve currency. A stronger greenback kept a lid on any meaningful upside for the dollar-denominated commodity.

Meanwhile, reports indicated that Democrats in the US House of Representatives are working on a $2.2 trillion coronavirus package boosted investors' confidence. The optimism, however, faded rather quickly and the same was evident from a turnaround in the equity markets, which tends to underpin the safe-haven gold. This, along with a fresh leg down in the US Treasury bond yields, might further contribute to limit any deeper losses for the non-yielding yellow metal, at least for now.

From a technical perspective, gold on Thursday managed to rebound from the vicinity of the 100-day SMA support. This makes it prudent to wait for a sustained break below the mentioned support before positioning for an extension of this week's steep decline. Nevertheless, the commodity remains on track to end the week with heavy losses and record the lowest weekly close since July.

Market participants now look forward to the US economic docket, highlighting the release of Durable Goods Orders. The data might influence the USD price dynamics, which along with the broader market risk sentiment might assist traders to grab some short-term opportunities.

Technical levels to watch