- Gold gained strong follow-through traction for the third consecutive session on Tuesday.
- Sliding US bond yields weighed on the USD and extended some support to the commodity.
- The underlying bullish sentiment might keep a lid on any runaway rally for the XAU/USD.
Gold maintained its strong bid tone through the mid-European session and was last seen trading around the $1844-45 region, just below one-week tops set earlier this Tuesday.
The precious metal built on last week’s recovery move from the $1785 area, or near two-month lows and continued gaining positive traction for the third consecutive session. The strong move up was sponsored by the emergence of some heavy selling around the US dollar, which, in turn, underpinned demand for the dollar-denominated commodity.
The USD bulls turned cautious amid doubts about a relatively faster economic recovery following the release of rather unimpressive US jobs report on Friday. This, along with a modest pullback in the US Treasury bond yields, further weighed on the greenback and provided an additional lift to the non-yielding yellow metal.
Meanwhile, the progress in coronavirus vaccinations and a budget resolution to fast-track the US President Joe Biden’s proposed $1.9 trillion stimulus package has been driving the reflation trade. In fact, Democrat lawmakers released the first draft of legislation that would send $1,400 stimulus payments to Americans earning up to $75,000 per year.
The underlying bullish sentiment in the financial markets seemed to be the only factor that held bulls from placing fresh bets and kept a lid on any further gains for the safe-haven XAU/USD. Hence, any subsequent positive move is more likely to confront stiff resistance and remain capped near 100-day SMA, currently around the $1870 region.
In the absence of any major market-moving economic releases from the US, the US bond yields and the USD price dynamics will play a key role in influencing the XAU/USD. Traders might further take cues from the broader market risk sentiment in order to grab some short-term opportunities.
Technical levels to watch
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