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Gold rallies toward $1300 as investors seek refuge

  • Troy ounce of precious metal gains nearly $20 on Friday.
  • Risk-aversion plays a major role in today's advance.
  • Greenback weakness persists as volume thins out towards the end of the week.

After spending the majority of the day in a tight range above the $1280 mark, the XAU/USD pair gained traction in the NA session and rose to its highest level since October 16 at $1297 before going into a consolidation phase. As of writing, the pair was trading at $1294, up 1.2% on the day.

Safe-havens gather strength on N. Korea headlines

Earlier in the session, Reuters reported that North Korea was not looking to negotiate with Washington on nuclear weapons, citing Han Tae Song, North Korea’s ambassador to the United Nations, who said that that as long as there was a continuous hostile policy against N. Korea by the U.S., there would be no restoration of diplomatic relations. In addition to gold, the market demand for other traditional safe-haven assets such as the JPY and the US Treasury bonds remained high in the session. In fact, the 10-year T-bond yield dropped more than 1% before recovering a small part of its losses.

On the other hand, a broad-based greenback weakness provided an additional boost to the pair on Friday. Having failed to reach the 94 handle after the upbeat macroeconomic data releases from the United States, the US Dollar Index turned south and was last seen at 93.58, where it was losing 0.28% and was looking to close the second straight week lower.

With the market volatility remaining low in the last few hours of the week, the pair is likely to stay quiet around its monthly highs. 

Technical levels to consider

The upsurge witnessed in the NA session carried the pair above the upper arm of the daily Bollinger Band, showing overbought conditions and suggesting that a technical recovery could be seen before the next leg up. Near-term resistances for the pair align at $1300 (psychological level), $1306 (Oct. 16 high) and $1313 (Sep. 26 high). On the downside, supports could be seen at $1281 (50-DMA), $1276 (20-DMA) and $1270 (200-DMA). 

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