Gold drifts into negative territory for the second straight session

   •  Bulls continue to struggle above $1240 level despite risk-off mood.
   •  A modest pickup in the USD demand prompts some fresh selling.
   •  Traders eye US macro data for some impetus ahead of Powell’s speech.

Gold reversed an early uptick to $1241 area and has now drifted into negative territory for the second consecutive session.

The Canadian arrest of the Chinese tech giant Huawei Technologies’ global CFO reignited fears of a further escalation in tensions between China and the US and triggered a fresh wave of global risk-aversion trade.

The global flight to traditional safe-haven status provided a minor boost to the precious metal, though bulls failed to capitalize on the up-move and continued with their struggle to sustain/build on the positive momentum beyond $1240 level.

Meanwhile, the latest leg of a sudden fall over the past hour or so could further be attributed to a modest pickup in the US Dollar demand, which tends to dampen demand for the dollar-denominated commodity.

However, an inversion of the short end of the US Treasury yield curve, signalling an impending recession, extended some support to the non-yielding yellow metal and might continue to help limit any deeper losses. 

Investors’ focus will remain glued to the Fed Chair Jerome Powell’s scheduled speech during the Asian session on Friday, especially after last Wednesday’s comments, saying that rates were nearing neutral levels.

Should Powell put more emphasis on the rising risks to the US economy, investors will be forced to rethink possibilities of a pause in the rate hike cycle in 2019 and eventually determine the commodity’s next leg of a directional move.

In the meantime, today’s US economic docket, highlighting the release of ADP report on private sector employment and ISM non-manufacturing PMI, will be looked upon for some short-term trading opportunities.

Technical levels to watch

Any subsequent below $1233 level now seems to find support near the $1228-27 area, which if broken might accelerate the fall further towards 50-day SMA, around the $1220-19 region. On the flip side, the $1240-42 region might continue to act as an immediate strong hurdle, above which the commodity seems all set to aim towards testing $1250 level.