- Gold remained on the defensive for the second successive session on Tuesday.
- Rallying US bond yields underpinned the USD and weighed on the commodity.
- The downside remains cushioned, warranting some caution for bearish traders.
Gold kicked off the new week on a softer note and eroded a part of Friday's strong gains to the highest level since mid-July. A modest US dollar rebound from one-month lows was seen as a key factor that prompted some profit-taking around the dollar-denominated commodity. Despite disappointing headline NFP print, additional details of the latest US monthly jobs report kept alive hopes for an imminent Fed taper announcement later this year. Investors still expect the US central bank to announce the timeline for tapering at the November meeting. This was evident from a sharp spike in the US Treasury bond yields, which provided a much-needed respite to the USD.
In fact, the yield on the benchmark 10-year US government bond shot back closer to the 1.35% threshold on Tuesday. This continued acting as a tailwind for the greenback and further weighed on the non-yielding yellow metal. Apart from this, the underlying bullish sentiment in the financial markets was seen as another factor that undermined demand for traditional safe-haven assets, including gold. The combination of factors kept the XAU/USD on the defensive through the Asian session, though the downside remains cushioned. The commodity, so far, has managed to hold its neck comfortably above a technically significant 200-day SMA and $1,800 round-figure mark.
There isn't any major market-moving economic data due for release from the US on Tuesday. Hence, the US bond yields will continue to play a key role in influencing the USD price dynamics. This, along with the broader market risk sentiment, might provide some impetus to gold and allow traders to grab some meaningful opportunities.
Short-term technical outlook
From a technical perspective, the recent strong rebound from multi-month lows faltered near the $1,832-34 strong horizontal resistance zone. This should now act as a key pivotal point for short-term traders, which if cleared decisively will set the stage for a further near-term appreciating move. Gold might then accelerate the momentum towards the $1,853-55 area, en-route the next relevant hurdle, near the $1,869-70 region.
On the flip side, the 100-day SMA, around the $1,815 level, closely followed by the very important 200-day SMA, near the $1,810 region, could protect the immediate downside. Some follow-through selling, leading to a subsequent slide below the $1,800 mark would suggest that the upward momentum is waning and prompt some technical selling. The corrective slide could then get extended and drag the XAU/USD back towards the $1,778-74 congestion zone.
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