- A sudden pickup in the US bond yields prompted fresh selling around gold in the last hour.
- The prevalent cautious mood could help limit deeper losses for the safe-haven commodity.
- Investors might also refrain from placing aggressive bets ahead of the FOMC policy decision.
Gold witnessed some selling during the mid-European session and refreshed daily lows, around the $1728 region in the last hour, with bears now challenging 100-hour SMA support.
The precious metal has been struggling to capitalize on the recent bounce from multi-month lows and once again faced rejection near the $1740-42 supply zone. The prospects for a relatively faster US economic recovery from the pandemic continued underpinning the US dollar. This, in turn, was seen as a key factor capping gains for the dollar-denominated commodity.
Meanwhile, the latest leg of a sharp fall could be attributed to a sudden spike in the US Treasury bond yields, which tends to drive flows away from the non-yielding yellow metal. In fact, the yield on the benchmark 10-year US government bond shot to over one-year highs, beyond 1.65% amid doubts that the Fed would retail ultra-low interest rates for a longer period.
The selloff in the US fixed income market might extend some support to the safe-haven XAU/USD. Apart from this, some repositioning trade ahead of Wednesday’s key event risk – the FOMC policy decision – could help limit deeper losses. This further makes it prudent to wait for some follow-through selling before positioning for any further near-term depreciating move.
From a technical perspective, any subsequent slide is likely to find decent support around the $1720-19 region, marking a short-term ascending trend-line extending from monthly lows. A convincing break below will be seen as a fresh trigger for bearish traders and set the stage for a slide back towards the $1700 round-figure mark.
Technical levels to watch
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