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Gold (XAU/USD) built on its recent bounce from multi-month lows, around the $1,677-76 region and edged higher during the first part of the trading action on Tuesday. As FXStreet’s Haresh Menghani notes, bulls are looking to seize control above the $1,720 pivot.

XAU/USD to validate a bullish double-bottom once above the $1760-65 area  

“The upbeat outlook for the US economy might keep a lid on any further gains for XAU/USD. Investors remain hopeful about the prospects for a relatively faster US economic recovery. This, along with the Biden administration’s planned stimulus of more than $2 trillion, has been fueling speculations about a possible uptick in US inflation and raised doubts that the Fed would retain ultra-low interest rates for a longer period. This should help limit any meaningful decline in the US bond yields and further collaborate to cap the upside for the metal.”

“The ongoing positive move validates the formation of a bullish double-bottom near the $1,677-76 area. The pattern, however, will be confirmed once the metal breakthrough previous strong support breakpoint, now turned resistance near the $1,760-65 region. In the meantime, the $1,742-44 supply zone could act as an intermediate barrier.”

“The $1,720 horizontal level now becomes immediate strong support to defend. This is followed by the $1,700 mark, which if broken decisively will negate any positive bias and turn the commodity vulnerable to retest the $1,677-76 region. Some follow-through selling will be seen as a fresh trigger for bearish traders and pave the way for an extension of the recent downward trajectory towards the next relevant support near the $1625 level. Gold could eventually drop to the $1600 round-figure mark in the near-term.”