- Strong continuation buying in the USD continues to put some downward pressure on gold prices.
- A softer risk tone and the pullback in US bond yields help limit deeper losses for the yellow metal.
- The technical setup favors the bears and supports the prospects for a further short-term decline.
The oro has recovered from the fall of the Asian session to new multi-month lows, below $ 1,710 level, and it has risen again to the region of $ 1,720 but has lacked continuation.
Gold has extended its recent bearish move and continued to lose ground during the early part of trading action on Tuesday. Sustained buying around the US dollar it has been considered one of the key factors that has continued to put pressure on gold prices, denominated in dollars, although a combination of factors has helped limit deeper losses.
The dollar has remained supported by the optimism about an American economic recovery relatively faster than the pandemic. This scenario has been seen bolstered by the US ISM manufacturing PMI., which jumped to a three-year high of 60.8 in February. This comes amid the progress of a massive US fiscal spending plan, which along with the impressive rate of COVID-19 vaccination has been fueling the reflation trade.
The negative factor, to a greater extent, has been offset by a softer risk tone, which tends to underpin demand for XAU / USD as a safe haven. This, coupled with a modest pullback in US Treasury yields, has offered some support and has helped the yellow metal find some support just above the round $ 1,700 level.
The intraday bounce could also be attributed to some short coverage amid oversold conditions on the short-term charts. Having said that, the previous day’s rejection near horizontal support, now turned into resistance near the $ 1760-65 region, and the lack of subsequent buying warrants some caution before opening bullish positions.
In the absence of major economic releases, USD price dynamics will play a key role in influencing the XAU / USD. Aside from this, general market risk sentiment and US bond yields could generate some short-term trading opportunities around gold.
Gold technical levels
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