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XAU / USD clings to gains near two-week highs, holding above $ 1,730 level

  • A combination of factors helps gold gain some positive traction on Tuesday.
  • A softer risk tone and falling US bond yields offer some support for gold.
  • A modest pickup in USD demand limits any further gains for the yellow metal.

The oro maintains its modest intraday gains during the European session on Tuesday, although it lacks solid follow-up purchases. The precious metal is trading around the $ 1,732-33 region, just below the two-week highs touched earlier this Tuesday.

Following the directionless price movements of the previous day, the XAU / USD has regained positive traction on Tuesday and has built on its recent rebound from multi-month lows, around the region of $ 1,677-76. The rally has been supported by a softer risk tone, which tends to benefit the safe-haven precious metal.

Apart of this, the current drop in US Treasury yields has further boosted money flows into the yellow metal that does not pay. That said, a modest pickup in demand for the US dollar has prevented bulls from opening aggressive positions and limited any significant spike in dollar-denominated gold prices.

Investors have remained optimistic about the US economic outlook. amid the impressive rate of vaccination against the coronavirus and US President Joe Biden’s infrastructure spending plan of more than 2 trillion dollars. This, coupled with growing expectations of an earlier-than-expected Fed rate hike, has further benefited the USD.

The reflation trade has been fueling the speculation about a pickup in US inflation and has raised doubts that the Fed can maintain ultra-low interest rates for a longer period. This should help limit any further decline in US bond yields and help limit XAU / USD gains.

There is no major economic data release on Tuesday. Therefore, USD price dynamics and US bond yields could provide some momentum. Apart from this, the broader market risk sentiment could also generate some trading opportunities around the XAU / USD.

Gold technical levels

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