Gold bulls keep the ground, BOE in focus

The dollar retreated slightly from a one-month high on Thursday due to the Fed postponing tapering until later this year, while concerns over heavily indebted Chinese property group Evergrande eased. The euro lost momentum on dismal Europe's PMIs and gold in attempting a tepid bounce.

The Bank of England's monetary policy committee will meet on Thursday. Traders expect the central bank to maintain its record-low interest rates while remaining cautious about tapering because of inflationary pressures.

The flash PMI for September reveals an unwelcome combination of sluggish economic growth and steeply rising inflation. Eurozone business activity grew at its weakest pace in five months in September as IHS Markit's Flash Composite Purchasing Managers' Index fell to 56.1 in September from 59.0 in August.

Meanwhile, the sub-index for input costs reached 70.5, its highest level in over 20 years. That suggests the trend of rising inflation may continue at least for a few months.

Fed's hawkish tone

The Fed left policy settings unchanged on Wednesday. Still, Jerome Powell hinted that a taper could begin soon, possibly in November, and said the board expected tapering to end around mid-2022, paving the way for the interest rate hike later on.

The possibility that Evergrande could default on its commitments jolted global markets early this week as investors were concerned about the potential impact on banks and property firms if Evergrande could not meet its obligations. However, concerns eased with the injection of 90 billion yuan ($13.9 billion) by the People's Bank of China.

Gold trying to mount a modest recovery

Gold is struggling to find immediate support at 1764, attempting a tepid bounce but remains in the red for the second straight session ahead of the BOE monetary policy decision.

A sustained break above this would allow gold bulls to challenge 1771. If the recovery momentum continues, the price could run into a wall of resistance around 1776.

On the downside, the immediate support lies in the 1761-1764 zone, where the previous low in the four-hour chart converges with the Fibonacci 23.6%.

If the latter is broken, the next support that is exposed would be 1752.

Gold bulls have one last line of defence at 1742, the previous week's low.

Events of the day

After Manufacturing and Composite PMIs tumbled in both Europe and England, investors now keep their eyes on BOE meeting minutes at 14:00 EEST.

The central bank of Turkey reports at the same time, which is expected to raise its interest rates.

US initial jobless claims and Canada core retail sales data are due to release at 15:30 that can shake USDCAD.