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  • Gold gained some positive traction on Monday, albeit lacked any follow-through buying.
  • The set-up favours bearish traders and supports prospects for a further depreciating move.
  • A sustained move beyond the $1772-73 region might prompt some short-covering bounce.

Gold trimmed a part of its intraday recovery gains and was last seen trading around the $1745 region, up around 0.85% for the day. The intraday uptick stalled near the $1760-65 horizontal support breakpoint, which should now act as a key pivotal point for intraday traders.

A fresh leg up in the equity markets undermined demand for traditional safe-haven assets and capped the upside for the XAU/USD. This, along with a sudden pickup in the US dollar demand, exerted some downward pressure on the dollar-denominated commodity. The intraday pullback could further be attributed to a modest rebound in the US Treasury bond yields, which tends to drive flows away from the non-yielding yellow metal.

From a technical perspective, the commodity’s inability to capitalize on the positive move and the emergence of some selling near a support-turned-resistance favours bearish traders. Moreover, RSI on hourly charts have recovered from oversold territory and are holding deep in the negative zone on the daily chart. This, in turn, suggests that the recent downfall might still be far from being over and adds credence to the negative outlook.

A subsequent slide below daily swing lows, around the $1734 area will reaffirm the bearish bias and pave the way for an extension of the recent depreciating move. The XAU/USD might then turn vulnerable to accelerate the fall back towards eight-month lows, around the $1717 region touched on Friday en-route the $1700 round-figure mark. Some follow-through selling has the potential to drag the metal further towards the $1675 horizontal support.

On the flip side, any meaningful positive move beyond the $1760-65 region might still be seen as a selling opportunity. This, in turn, should cap the upside for the XAU/USD near the $1772-73 area. That said, a sustained strength beyond might trigger a short-covering move and assist the metal to aim back to reclaim the $1800 mark. The next relevant resistance is pegged near last week’s swing highs, around the $1814-16 supply zone.

XAU/USD daily chart 

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Technical levels to watch

 

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