Gold inter-markets: likely to be confined within a broader trading range

After rising to a three-week high on Tuesday, Gold has been drifting lower and is now trading in negative territory for third consecutive day, around $1335 level. 

The latest leg of downslide on Thursday was primarily driven by a broad based greenback recovery, as depicted by a sharp recovery in the USD/JPY major. Meanwhile, a sudden up-surge in the US longer-term (30-years) Treasury bond yields is pointing to increasing possibilities of an eventual Fed rate-hike action in 2016, albeit may not be in September. Moreover, the recent hawkish comments from various Fed officials, including the Fed Chair Janet Yellen, has left doors open for a Fed rate-hike, which eventually restricted further upside and is contributing to the precious metal's reversal from multi-week highs. 

Even, a rise in the Volatility Index (VIX), leading to a slide in the broader US equity index (S&P 500) that should have been supportive for the safe-haven appeal of the yellow metal has failed to restrict the corrective move. 

Going forward, the metal would continue to be driven by sentiment surrounding Fed's next monetary policy action and a further recovery in the US Dollar is likely to weigh on the yellow metal. Meanwhile, a rise in VIX might limit any additional downslide and could thus confine the metal within a broad trading range.