Gold price traded with a positive bias for the fourth consecutive day on Thursday and is presently positioned just below the 1,920 region, or a nearly two-week high reached the day before. However, the XAU/USD lacks bullish conviction, necessitating caution before positioning for an extension of the recent rebound from the 1,885 zone, or the lowest level since March 13, reached this week.

Against the backdrop of China’s deteriorating economy, a slew of manufacturing surveys released on Wednesday painted a bleak picture of the global economy’s health. In addition, dismal macroeconomic data from the United States (US) revealed that business activity in the largest economy in the world approximated stagnation in August. In fact, the S&P Global Flash Composite US PMI experienced its largest decline since November 2022, falling from 52 to 50.4 in August. This contributes to fears of a more severe global economic downturn and turns out to be a key factor supporting the safe-haven Gold price.

Aside from this, the decreasing likelihood of additional policy tightening by the Federal Reserve (Fed), which resulted in the overnight decline in the yield on the benchmark 10-year US government bond from a 16-year high, supports the non-yielding yellow metal. However, the markets appear uncertain about when the Fed will end its rate-hiking cycle or even begin reducing rates. Together with the emergence of some US Dollar (USD) purchases, this may discourage traders from placing aggressive bullish wagers on the Gold price.

In fact, the USD Index (DXY), which measures the Greenback versus a basket of currencies, appears to have halted its retracement decline from its highest level in over two months, which was reached on Wednesday. As investors eagerly await Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday, a modest USD strength may keep the US Dollar-denominated Gold price in check. Investors will seek hints regarding the path of future rate hikes, which will drive USD demand and provide fresh impetus to the XAU/USD.

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