XAU/USD at weekly high, bulls awaiting sustained move beyond $1,900

Gold gained traction for the third straight day and climbed to a fresh weekly high on Thursday.

A less hawkish Fed extended support to the metal amid the latest COVID-19 outbreak in China.

The prospects for a further tightening by the Fed revived the USD demand and capped gains.

Gold built on this week's goodish rebound from the $1,850 area, scaling higher for the third successive day on Thursday. The momentum pushed spot prices to a fresh weekly high during the early European session, though bulls struggled to capitalize on the move further beyond the $1,900 round-figure mark.

On Wednesday the Fed increased the Fed Funds rate by 50 bps in the the largest rate hike since 2000, and the beginning of quantitative tightening (QT) – but it downplayed the possibility of further super-size hikes. In the post-meeting press conference, Powell eased market fears about a more aggressive tightening path and said that the Fed was not actively considering a 75 bps rate hike in June. This, in turn, was seen as a key factor that offered some support to the non-yielding yellow metal. Apart from this, concerns about the potential economic fallout from rising COVID-19 cases and strict lockdowns in China benefitted the safe-haven gold.

That said, the markets are still pricing in a further 200 bps rate hike for the rest of 2022, which was evident from a fresh leg up in the US Treasury bond yields. This, in turn, helped revive the US dollar demand and acted as a headwind for the dollar-denominated commodity. This makes it prudent to wait for strong follow-through buying before confirming that gold has bottomed out near the $1,850 region and is positioning for a more robust near-term appreciating move.

Market participants now look forward to the US economic docket, featuring the release of Weekly Initial Jobless Claims later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities. 

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