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  • US dollar recovery challenges the XAU bounce above 1700.
  • Hopes of economic upturn amid easing lockdowns continue to weigh.
  • Gold finds support once again near 1697 ahead of US ISM Services PMI.

Having found fresh bids once again near $1697 levels, Gold prices (XAU/USD) attempt a recovery above 1700 mark heading into the European open.

The yellow metal takes advantage of the fresh selling seen in the US dollar against its major peers. The US dollar index stalled its tepid bounce just above 99.50 to now trade moderately lower at 99.40.

Further, the US-China tensions over Beijing’s mishandling of the coronavirus outbreak continue to weigh on the investors’ sentiment and therefore, offer support to the XAU bulls. The renewed spat seems to spill over on the trade front, with US President Donald Trump having threatened tariffs on China.

Earlier today, the spot extended the overnight decline and reached a fresh daily low at 1696.82, as markets cheered the increased odds of a global economic upturn sooner, especially after some of the major economies announced the easing of the virus-led restrictions.

Italy and the US were among the countries, which are likely to relax the lockdown measures from Monday. This boded ill for the traditional safe-haven, gold. Meanwhile, the holiday-thinned trading accelerated the downside moves in the bullion.  

Moreover, the ongoing recovery in oil prices revived the demand for gold as an inflation hedge. In the day, gold prices will continue to track the dollar performance and sentiment on the global stocks ahead of the US ISM Non-Manufacturing PMI data.

Gold: Technical levels to watch

At the press time, gold trades at 1701.22, modestly flat on the day. The bulls are likely to struggle with its recovery so long as the spot remains below the 10-DMA at 1710. The 21-DMA is likely to cap the immediate decline. A break below which, Monday’s low of 1692.30 could be tested.