• Gold struggles to preserve its modest gains despite softer US bond yields, the USD.
• Bets for more aggressive Fed rate hikes continue to act as a headwind for the metal.
• The downside seems cushioned as investors await this week’s key US macro releases.

Gold gains positive traction on the first day of a new week and hits a fresh daily high, around the $1,670 area during the early European session. The uptick, however, meets with a fresh supply at higher levels, with spot prices sliding back below the $1,665 level in the last hour.

A combination of factors exerts some downward pressure on the US dollar, which, in turn, offers some support to the dollar-denominated gold. Reports that the UK government is expected to roll back the proposed scrapping of the higher rate of income tax provides a goodish lift to the British pound. This, along with a further decline in the US Treasury bond yields, continues to undermine the greenback.

In fact, the benchmark 10-year US Treasury note moves away from a 12-year high touched last Wednesday. Apart from this, concerns about a deeper global economic downturn and geopolitical risks provide a modest lift to the safe-haven XAU/USD. That said, the prospects for a more aggressive policy tightening by major central banks, including the Fed, should cap the non-yielding yellow metal.

Investors seem convinced that the US central bank will continue to hike interest rates at a faster pace to curb inflation and have been pricing in another supersized 75 bps increase in November. The bets were reaffirmed by the recent hawkish remarks by several FOMC officials and Friday's release of the US Personal Consumption Expenditures (PCE) data. This, in turn, warrants some caution for bulls.

Traders might also refrain from placing fresh directional bets and prefer to move on the sidelines ahead of important US macro data scheduled at the beginning of a new month. A rather busy week kicks off with the release of the US ISM Manufacturing PMI on Monday. This, along with speeches by FOMC members and the US bond yields, will drive the USD demand and provide some impetus to gold.

The focus, however, remains on the closely-watched US monthly employment details on Friday. The popularly known NFP report will play a key role in influencing Fed rate hike expectations and the USD price dynamics. This, in turn, should help investors to determine the next leg of a directional move for gold.

Technical levels to watch