• Gold meets with a fresh supply on Wednesday and erodes a part of the overnight gains.
• Resurgent USD demand, rising US bond yield exert some downward pressure on the metal.
• Recession fears could help limit losses for the XAU/USD ahead of Fed’s Powell on Friday.

Gold turns south following an early uptick to the $1,754 area and drops to a fresh daily low during the early North American session. The XAU/USD reverses a part of the previous day's goodish recovery move to the weekly high and is currently placed around the $1,745 level, down nearly 0.25% for the day.

The downtick is sponsored by the emergence of fresh buying around the US dollar, which tends to dent demand for dollar-denominated gold. The overnight hawkish remarks by Minneapolis Fed President Neel Kashkari revive bets for a further policy tightening by the US central bank. Adding to this, Wednesday's release of mostly upbeat US Durable Goods Orders data reaffirms hawkish Fed expectations and further underpins the greenback.

The current market pricing indicates an equal possibility of a 50 bps rate hike or a supersized 75 bps move at the September FOMC policy meeting. This, in turn, trigger a fresh leg up in the US Treasury bonds and further contributes to driving flow away from the non-yielding yellow metal. In fact, the yield on the benchmark 10-year US government bond climbs to a nearly two-month high and offers additional support to the buck.

Apart from this, signs of stability in the financial markets further seem to weigh on the safe-haven XAU/USD, though recession fears could help limit deeper losses, at least for now. Investors also seem reluctant and might prefer to wait for a more hawkish message from Fed Chair Jerome Powell at the Jackson Hole symposium on Friday. This, in turn, warrants some caution for aggressive bearish traders and positioning for any further decline.

Technical levels to watch