Gold turns positive on the day near $1215 as risk aversion offsets USD gains

  • Annual core inflation in the U.S. rises to 2.4% in July.
  • TRY's collapse creates a risk-averse environment.
  • Wall Street records sharp losses in the early trading hours of the NA session.

Despite the board-based USD strength, the XAU/USD pair gained traction in the last hour to turn positive on the day. As of writing, the pair was up 0.2% on the day at $1215.

The data from the U.S. on Friday showed that the annual inflation measured by the core-CPI reached its highest growth rate in nearly 8 years at 2.4% in July. On the back of the data, the US Dollar Index reached its best level since July 2017 at 96.30 and steadied around that level, where it was up 0.7% on the daily basis.

However, the pair extended its upside despite the greenback strength as investors continued to seek refuge amid the negative impact of the TRY collapse, which lost as much as 20% against the USD in the last 24 hours, on global financial institutions. Germany's DAX fell around 2% while Deutsche Bank shares erased over 6% and Wall Street started the day with sharp losses. The S&P 500 Financials Index was down 1.5% as of writing and the financial-heavy Dow Jones Industrial Average was losing 0.7%.

Investors are likely to stay away from risk-sensitive assets ahead of the weekend and gold could continue to gather strength against major currencies. The XAU/EUR pair, meanwhile, is up 1.15% on the day at €1064.

Technical levels to consider

The pair could encounter the first resistance at $1220 (20-DMA) ahead of $1228 (Jul. 31 high) and $1235 (Jul. 26 high). On the downside, supports could be seen at $1206 (daily low), $1200 (psychological level) and $1194 (Mar. 10, 2017, low).