- Gold witnessed a short-covering bounce and recovered the overnight losses to multi-month lows.
- A sharp pullback in the US bond yields undermined the USD and remained supportive of the move.
GOLD held on to the strong recovery gains and was placed near the top boundary of its daily trading range, just below the $1,710 level during the mid-European session. The XAU/USD has now erased the previous day's losses to nine-month lows, though a combination of factors should keep a lid on any further recovery.
Adding to this, the underlying bullish sentiment in the financial markets – as depicted by a positive tone around the equity markets – might further collaborate to cap gains for the safe-haven XAU/USD. This makes it prudent to wait for some follow-through buying before confirming that the non-yielding yellow metal has bottomed out in the near-term.
From a technical perspective, gold is wavering within a potential two-week-old bearish channel formation on the 4-hourly chart which is challenging bullish traders. If the candlestick closes above that level could boost the renewed upside, calling for a test of the strong hurdle at $1,717. Acceptance above the critical resistance could validate a bearish channel breakout, opening doors for a test of the support breakout level at $1,760
Alternatively, $1,680 offers an immediate cushion, below which the falling trendline support at could be put at risk. A sharp sell-off towards the $1,650 psychological level cannot be ruled out if the bulls fail to resist above the June 2020 low near $1,670.
