Gold inter-markets: seems vulnerable to resume downward trajectory if risk-appetite improves

Gold extended its tepid rebound from Wednesday's weekly low for the second consecutive day but the recovery lacked momentum and the metal remained below 200-day SMA.

Currently trading around $1258 level, Thursday's recovery was primarily driven by risk-off sentiment, as depicted by a rise in the Volatility Index, which is weighing on riskier assets - like equities, and extending support to the yellow metals safe-haven appeal. The prevalent risk-off mood is further reinforced by continuing slide in the broader US equity index, S&P 500 and the US longer-term (30-years) Treasury bond yields. 

Thursday's disappointing release of Chinese trade balance data resurfaced worries of a China-led global economic slowdown and is weighing on investor sentiment. Adding to this, a broad based greenback retracement, as reflected by a corrective move in the USD/JPY major, is further extending support to dollar-denominated commodities - like gold.

The yellow metal's recovery, however, remained tepid as Wednesday's minutes from FOMC’s September meeting left doors open for an imminent Fed rate-hike action by the end of this year, which is limiting flows towards non-yielding commodity. 

Going forward, a slight improvement in investor risk appetite would diminish the precious metal's investment appeal and the metal is more likely to extend its downward trajectory in the near-term.