I have a 2002 S60. I forget the paint color name but its sort of a blue metallic.
It sits in a garage most weekends and every evening. The rest of the time its outside in North Central California. So wet but not freezing winters and sometimes VERY hot summers.

I have noticed in the past few months that the clearcoat is wearing away in a 2-3 in band across the leading edge of the hood. I used some polishing wax and you can see some blue on the cloth that is comming off. Polishing with wax makes it about 90% better but if you look really clost you can see the damage. Once the wax wears off you can see the less than shine area.

Is this a defect?

What is the best way to protect it at this point?

Sounds like clearcoat failure. You might want to look at getting your hood repainted because it will only get worse. No real fix for it.

before you get it resprayed try some polishing compound not wax, i had small scrathes all over my roof and you could not see any reflection, the clear coat looked shot, a little polishing compound and some wax to seal it and it looks so much better now better than when i bought it

Hows the weather on where you live? That was happening to my Volvo as well then i jus decided to get a car cover to protect it from the weather. So far, it hasnt gotten any worse then what it was...the site i believe was carscover.com (http://www.carscover.com). Hope this helped...