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  • Gold witnessed some heavy selling on Thursday and dropped to over two-week lows.
  • Rallying US bond yields, sustained USD buying continued exerting pressure on the metal.
  • The underlying bullish sentiment further contributed to the ongoing downward trajectory.

Gold maintained its offered tone through the mid-European session, albeit has managed to recover a bid from two-and-half-week lows set earlier this Thursday. The commodity was last seen trading around the $1817-18 region, still down around 0.90% for the day.

The precious metal extended this week’s rejection slide from the $1875-76 supply zone and continued losing ground for the third consecutive session. The downward trajectory was sponsored by some strong follow-through buying around the US dollar, which tends to undermine demand for the dollar-denominated commodity.

The USD remained well supported by optimism over additional US fiscal stimulus, progress with coronavirus vaccinations, as well as improving economic data. Apart from this, hopes for a strong global economic recovery remained supportive of the underlying bullish tone and further weighed on the safe-haven XAU/USD.

Meanwhile, expectations of a larger government borrowing to fund the stimulus pushed the yield on the benchmark 10-year government bond to near 10-month high touched in January. This was seen as another factor that further drove flows away from the non-yielding yellow metal and contributed to the intraday decline.

That said, slightly oversold RSI on hourly charts extended some support to the XAU/USD and helped limit the downside, at least for the time being. Nevertheless, the metal remains vulnerable to prolong its recent bearish trajectory and slide further below January monthly swing lows, around the $1800 round-figure mark.

Market participants now look forward to the release of the Initial Weekly Jobless Claims data from the US for some impetus. Traders will further take cues from the US stimulus headlines, which, along with the US bond yields/USD price dynamics might produce some meaningful trading opportunities around the XAU/USD.

Technical levels to watch