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  • Gold witnessed heavy selling for the second straight session on Tuesday.
  • The stage seems set for a slide back towards retesting multi-month lows.

Gold added to the previous day’s losses and witnessed some follow-through selling for the second consecutive session on Tuesday. The downward momentum dragged the commodity below the $1690 level, or to fresh three-week lows during the mid-European session.

The US dollar rallied to fresh four-month tops, which, in turn, was seen as a key factor exerting pressure on the dollar-denominated commodity. Apart from this, a fresh leg up in the US Treasury bond yields further collaborated to drive flows away from the non-yielding yellow metal.

From a technical perspective, the XAU/USD on Monday confirmed a bearish breakdown through a two-week-old trading range. Subsequent weakness below the $1700 mark was seen as a fresh trigger for bearish traders and further aggravated the bearish pressure surrounding the commodity.

Meanwhile, technical indicators on the daily chart are holding deep in the bearish territory and support prospects for additional weakness. That said, extremely oversold RSI on hourly charts warrants some caution before positioning for any further depreciating move.

Nevertheless, the XAU/USD remains vulnerable to slide further towards challenging multi-month lows, around the $1677-76 region. Some follow-through selling will set the stage for a fall towards an intermediate support near the $1630-25 region en-route the $1600 mark.

On the flip side, any attempted recovery back above the $1700 mark might now be seen as an opportunity to initiate fresh bearish positions. This, in turn, should cap the upside near the mentioned trading range support breakpoint, now turned resistance near the $1720 region.

XAU/USD 4-hourly chart

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Technical levels to watch