Gold clings to small gains above $1,500 as focus remains on US-China trade talks

• Gold struggles to find direction as markets wait for trade war headlines.
• 10 year United States (US) Treasury bond yield posts small gains.
• US Dollar Index drops to fresh weekly lows below 98.70.

After climbing to its highest level in six days at $1,517 on Wednesday, the XAU/USD pair failed to build on its gains and is now moving sideways in a relatively tight range above the $1,500 mark as investors refrain from making large bets while waiting for fresh developments surrounding the United States (US)-China trade talks. As of writing, the pair was up around $1 on the day at $1,5067.

Earlier in the day, Bloomberg reported that the US was considering to get into a currency agreement with China as part of a partial trade deal. However, China’s foreign ministry spokesman Geng Shuang on Thursday reiterated that the US needs to stop unreasonable pressure on Chinese companies, including Huawei Technologies. 

Despite the uncertainty regarding the possibility of the sides reaching a partial deal, the 10-year US Treasury bond yield posts modest gains on Thursday to suggest that investors are not yet fleeing to safer assets. 

The USD weakens ahead of inflation readings

On the other hand, the Greenback struggles to find demand ahead of the US inflation data and allows the pair to float in the positive territory. Markets expect the annual core Consumer Price Index (CPI) to stay unchanged at 2.4% in September. Although the CPI is not the Federal Reserve's preferred gauge of inflation, a large deviation from the market consensus could cause the volatility surrounding the USD to increase. 

Pariticpant will also be keeping a close eye on fresh trade headlines and Wall Street's performance in the second half of the day.

Technical levels to watch for