Gold Price Analysis: XAU/USD inches higher toward $1,740
- Gold registers modest daily gains, erases Thursday's losses.
- US Dollar Index loses its traction after testing 97.00.
- UoM's Michigan Consumer Sentiment Index is expected to improve slightly in June.
The broad-based USD strength witnessed in the second half of the day on Thursday caused the XAU/USD pair to turn south and close the day in the negative territory.
However, the intense flight-to-safety helped the precious metal limits its losses. On Friday, the greenback seems to be having a difficult time preserving its strength and allowing the pair to recover its losses. At the moment, XAU/USD was up 0.5% on the day near $1,737.
USD continues to react to changes in risk perception
Renewed fears over a second coronavirus wave causing lockdowns and delaying the global economic recovery forced investors to seek refuge in safer assets. The US Dollar Index, which fell to a fresh three-month low of 95.72, rose sharply and gained 0.8% on Thursday. However, the index seems to have gone into a consolidation phase near 96.70 after testing 97.00 on Friday.
Reflecting the risk-off environment, Wall Street's main indexes suffered heavy losses and the 10-year US Treasury bond yield lost more than 8%. On Friday, the mood seems to be improving with US stock index futures staying in the positive territory and the 10-year T-bond yield rising 6.5%.
In the second half of the day, the University of Michigan's Consumer Sentiment Index will be looked upon for fresh impetus. More importantly, investors will be keeping a close eye on Wall Street's performance.
Technical levels to watch for