The dollar has recovered on a trade-weighted basis, while global bond yields have edged higher and this combination has halted further short-term gold prices, although prices overall held firm.
The US economic data releases had very little impact on US markets and gold maintained a firm tone as it continued to probe resistance above the $1,270 resistance area.
Comments from Dallas Fed President Kaplan were in line with recent rhetoric, while reaction to the Fed’s Beige Book was very limited even though there was evidence of further labour-market tightening and upward pressure on wages.
The US currency was unable to gain any traction and the gold also popped higher during Asian trading on Thursday with Chinese buying briefly pushing prices to a high around $1,272, although overall ranges were relatively narrow.
There was no major market reaction to the latest US Presidential TV debate.
The dollar overall was able to regain some ground later in Asian trading with USD/JPY back above 103.50 as US 10-year yields moved back above the 1.75% level.
A stable dollar and small increase in US yields blocked the potential for gold to make further headway, although retracements were limited as overall sentiment held firm and prices held just below $1,270 ahead of the ECB rate decision.
The ECB decision to leave all main interest rates unchanged had little overall impact with gold trading fractionally higher above $1,270 in tight ranges.
Comments from ECB President Draghi will be watched closely in his press conference, although the overall impact on gold may be mixed. A notably dovish stance would tend to strengthen the dollar against the Euro and support gold, but this would be offset by a decline in Eurozone bond yields. Conversely, a more hawkish tone would undermine the dollar, but also trigger a spike in global yields, which would curb potential gold gains.
The US jobless claims and Philly Fed data will also be significant for the US outlook, although the overall reaction is likely to be limited.
