Month- and quarter-end flows and position adjustments added to the upside pressure surrounding the bullion

Gold prices have been trending north for the fourth session in a row on Friday, extending recovery from 2.5-year lows seen at the start of the week. XAUUSD bounced off $1,614 to regain the $1,650 zone. The precious metal advanced towards the $1,670 zone that represents the last line of defense ahead of the descending 20-DMA, followed by the $1,700 psychological level last seen in mid-September.

The precious metal bounced due to a combination of oversold conditions and a weaker dollar, with month- and quarter-end flows and position adjustments adding to the upside pressure surrounding the bullion. In the process, the near-term technical picture has improved, but the overall tone in longer-term timeframes remains bearish.

Investors continue to monitor developments in the United States. Should the incoming economic data revive 2023 rate hike bets, the recent upward move in the yellow metal could easily reverse. As the Federal Reserve remains hawkish, while the fundamentals point at a resilient economy, the US dollar is likely to further outperform its rivals, including the non-yielding precious metal.

The greenback came off two-decade peaks seen around 114.80 earlier in the week. The DXY has settled around 112.00 since then, looking steadier ahead of the weekend. It looks like demand for the buck will reemerge after some hesitation as risk aversion continues to dominate global financial markets.

At this stage, bullish extension could bring the price of gold to the mentioned 20-DMA. Sustained strength beyond this supply zone could trigger a more decisive short-covering move and allow buyers to reclaim the $1,700 mark. Otherwise, the selling pressure would reemerge to send the yellow metal back below the $1,620 region, followed by the $1,600 mark last seen in April 2020.


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