- A combination of factors fails to help gold capitalize on the initial rally to week-long highs.
- The underlying bullish tone in financial markets limits safe-haven gold gains.
- The recent rally in US bond yields is also preventing bulls from opening new positions around the yellow metal.
The oro has struggled to sustain modest initial gains to new one-week highs and has retraced near the lower end of its daily trading range, just below the $ 1,810 level.
The precious metal has gained some traction to the upside during the early part of Tuesday’s trading action and has built on the recent strong rebound from multi-month lows around the $ 1,760 region. The rally was supported by a softer tone around the US dollar, which tends to benefit gold prices, denominated in dollars.
Having said that, the underlying bullish tone in financial markets has weighed on demand for traditional safe-haven assets and it has limited the rise of the XAU / USD. Investor appetite for perceived riskier assets has remained supported by the impressive rate of vaccination for COVID-19 and hopes for a strong global economic recovery.
In addition, the progress on US President Joe Biden’s proposed $ 1.9 trillion stimulus package it has further boosted the reflation trade. Prospects for a massive US fiscal spending plan have pushed the benchmark 10-year bond yield to new one-year highs. This has been seen as another factor limiting the gains of the yellow metal.
Meanwhile, the decline has remained supported, at least for the moment, as investors appear reluctant to open aggressive positions. before the testimony of Fed Chairman Jerome Powell, later this Tuesday. Powell is expected to reaffirm the ultra-accommodative policy stance, which could potentially calm the bond markets and extend some support for XAU / USD.
Therefore, it will be prudent to wait for a strong continuation of the selling before confirming that the recent recovery movement may have lost steam. Sustained weakness below the $ 1,800 level will be seen as a further trigger for the bears and will lay the groundwork for the resumption of the precious metal’s previous downtrend.
Gold technical levels
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