Gold at crossroads ahead of US Services PMI

Gold price breaks out of descending parallel channel as market mood improves. US Dollar selloffs are halted by rising US Treasury bond yields. ISM Services PMI release is still awaited by investors to gain fresh impulse on the direction of the Gold Index XAU/USD.

Gold price opened the year at $1,823.76 and reached a year-to-date high of $1,960 on February 2, right in between the first Federal Reserve meeting of the year and the surprising release of the US jobs report for January. Gold price went on a big downtrend from there, reaching year-to-date lows just above $1,800, where it found support. At the time of writing, gold is trading at 1835.92 per ounce versus the previous closing at 1836.30.

Gold price rallied in the first half of the trading week, breaking out of a bearish trend that had dominated XAU/USD price action for most of February. This recent surge was halted early on Thursday as US Treasury bond yields gathered strength and supported the US Dollar. Gold traders now await more Fed clues, which could come from Fed officials’ speeches and Friday’s ISM Services PMI.

Investors are watching the US Treasury bond yields, which in the case of the benchmark 10-year bond, have seen a rally past the 4% resistance and is nearing levels not seen since last October. Due to the inverse correlation of gold price with the US Treasury yields, this could provide further downward pressures on the Gold Index XAU/USD.

Earlier in the week, softer US data led by decreasing inflation expectations in the CB Consumer Confidence report released on Tuesday, triggered some profit-taking on the US Dollar longs, as the reading might somewhat ease the pressure on the Fed to increase its interest rate hike path again. This was followed on early Wednesday by higher-than-expected Purchasing Managers Index (PMI) readings in China, which improved the market mood in Asia.