- A combination of factors failed to assist gold to capitalize on the early uptick to one-week tops.
- The underlying bullish tone in the financial markets capped gains for the safe-haven commodity.
- The recent rally in the US bond yields also held bulls from placing bets around the yellow metal.
Gold struggled to preserve modest intraday gains to one-week tops and was last seen hovering near the lower end of its daily trading range, just below the $1810 level.
The precious metal gained some traction during the early part of the trading action on Tuesday and built on the recent strong rebound from multi-month lows, around the $1760 region. The uptick was supported by a softer tone surrounding the US dollar, which tends to benefit the dollar-denominated commodity.
That said, the underlying bullish tone in the financial markets undermined demand for traditional safe-haven assets and capped the upside for the XAU/USD. Investors' appetite for perceived riskier assets remained supported by the impressive pace of COVID-19 vaccinations and hopes for a strong global economic recovery.
Adding to this, the progress on US President Joe Biden's proposed $1.9 trillion stimulus package further fueled the reflation trade. The prospects for a massive US fiscal spending plan pushed the yield on the benchmark 10-year bond to fresh one-year tops. This was seen as another factor capping gains for the non-yielding yellow metal.
Meanwhile, the downside remained cushioned, at least for the time being, as investors seemed reluctant to place aggressive bets ahead of the Fed Chair Jerome Powell's testimony later this Tuesday. Powell is expected to reassure ultra-accommodative policy stance, which could potentially calm bond markets and extend some support to the XAU/USD.
Hence, it will be prudent to wait for some strong follow-through selling before confirming that the recent recovery move might have already run out of steam. A sustained weakness back below the $1800 mark will be seen as a fresh trigger for bearish traders and set the stage for the resumption of the metal's prior depreciating trend.
Technical levels to watch
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