- A combination of factors prompted some fresh selling around gold on Monday.
- The upbeat market mood, surging US bond yields exerted pressure on the metal.
- Sustained USD selling might extend some support and help limit any further losses.
Gold maintained its offered tone through the first half of the European session and was last seen hovering near the lower boundary of its daily range, around the $1818-17 region.
The precious metal failed to capitalize on Friday’s intraday bounce from the $1810 area, instead met with some fresh supply on the first day of a new trading week. The downtick was sponsored by a combination of factors, though lacked any strong follow-through amid sustained US dollar selling bias.
The progress in vaccinations for the highly contagious coronavirus disease and hopes for a massive US fiscal spending plan remained supportive of the underlying bullish sentiment in the financial markets. This turned out to be one of the key factors weighing on the safe-haven XAU/USD.
Meanwhile, firming expectations for the passage of the US President Joe Biden’s proposed $1.9 trillion COVID-19 stimulus package pushed the yield on the benchmark 10-year government bond to the highest level since February 2020. This further drove flows away from the non-yielding yellow metal.
That said, the USD seemed rather unimpressed by the ongoing upsurge in the US bond yields, rather remained on the defensive. This, in turn, was seen as the only factor that might hold traders from placing aggressive bearish bets and help limit the downside for the dollar-denominated commodity.
Hence, it will prudent to wait for some follow-through selling below Friday’s swing lows and a subsequent break through the $1800 mark before positioning for any further depreciating move. This would set the stage for an eventual fall below monthly lows support near the $1785 region.
In the absence of any major market-moving economic releases from the US, the broader market risk sentiment will continue to play a key role in influencing the XAU/USD. Apart from this, the US bond yields and the USD price dynamics will also be looked upon for some short-term trading opportunities.
Technical levels to watch
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