Recession fears could help limit losses for XAU/USD

Mester, however, noted the aggressive move to boost the borrowing cost over the last year is nearing its end amid signs of an economic slowdown in the United States (US). Data released on Thursday showed that the Philadelphia Fed Manufacturing Index sank more than expected in April, to the lowest level since May 2020. Adding to this, the US Department of Labor (DOL) reported that the number of Americans filing claims for unemployment benefits unexpectedly rose to 245K during the week ended April 15. Furthermore, US Existing Home Sales also slowed substantially in March.

The data comes amid worried about economic headwinds stemming from rising borrowing costs and tempers investors' appetite for riskier assets, which is evident from a softer tone around the equity markets and might lend support to the safe-haven Gold price. The global flight to safety, meanwhile, leads to a further decline in the US Treasury bond yields and keeps a lid on any meaningful upside for the USD. This might hold back traders from placing aggressive bearish bets around the XAU/USD and turn out to be a key factor limiting the downside, at least for the time being.