Gold Price Analysis: XAU/USD ticks higher to $1700 neighbourhood, lacks follow-through

Gold reversed an Asian session dip to near nine-month lows and was last seen hovering near the top end of its daily trading range, around the $1700 mark.

The precious metal prolonged its recent bearish trajectory and witnessed some selling during the early part of the trading action on the last day of the week. Some follow-through uptick in the US Treasury bond yields turned out to be one of the key factors that exerted pressure on the non-yielding yellow metal, though oversold conditions helped limit any further losses.

The Fed Chair Jerome Powell disappointed investors on Thursday and said that the recent surge in the US Treasury bond yields was not a disorderly move. Powell's remarks triggered a violent sell-off in the US fixed income market. This, in turn, pushed the US dollar to three-month tops and exerted some additional downward pressure on the dollar-denominated commodity.

Meanwhile, the bond market rout fueled fears about distressed selling in other asset classes and took its toll on the global risk sentiment. This was evident from a weaker tone surrounding the equity markets, which extended some support to the safe-haven XAU/USD. Investors also seemed reluctant to place aggressive bets ahead of Friday's release of the US jobs data.

The NFP report will be looked upon to reinforce the prospects for a relatively stronger US economic recovery. This, in turn, will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to the XAU/USD. Conversely, a softer reading is likely to be offset by the optimism over US President Joe Biden's $1.9 trillion stimulus package.

Given the upbeat US economic outlook, investors have been pricing in an uptick in US inflation. This, along with expectations for a larger government borrowing to fund the stimulus, should continue to underpin the US bond yields, suggesting that the path of least resistance for the XAU/USD remain on the downside. Hence, any attempted recovery move might still be seen as a selling opportunity.

Technical levels to watch