Gold struggles for a firm direction, stuck in a range around $1775 region

Gold extended its sideways consolidative price action and remained confined in a narrow trading band, around the $1775 region through the early European session.

The precious metal failed to capitalize on the previous day's goodish intraday bounce from sub-$1760 levels, or weekly lows touched in the aftermath of stellar US monthly jobs report. The headline NFP showed that the US economy added 4.8 million jobs in June as compared to 3 million expected and the unemployment rate dropped to 11.1% from 13.3% in May.

This was followed by Friday's upbeat China Caixin Services PMI, which jumped to the highest since April 2010 and came in at 58.4 for June as against an expected fall to 49.9. The positive economic data offered further evidence that the worse of the coronavirus pandemic was probably over and revived hopes for a V-shaped global economic recovery.

This comes on the back of the latest optimism over a potential vaccine for the highly contagious coronavirus disease and remained supportive of the upbeat market mood. The risk-on environment was seen as one of the key factors that undermined demand for traditional safe-haven assets and kept a lid on any meaningful positive move for gold.

The negative factor, to a larger extent, was negated by the ever-increasing COVID-19 cases across the world. Investors remain concerned that a surge in cases could trigger renewed lockdown measures and delay economic recovery. This coupled with the prevalent USD selling bias extended some support to the dollar-denominated commodity.

Apart from the mentioned diverging forces, relatively thin liquidity conditions on the back of a holiday in the US further held investors from placing any aggressive bets. This, in turn, led to a subdued/range-bound trading action through the first half of trading action on the last day of the week.

Technical levels to watch