Gold corrects from 2-week tops, back near $1600 mark

Gold extended its intraday pullback from near two-week tops and momentarily slipped below the $1600 mark in the last hour, albeit quickly recovered a bit thereafter.

Following the previous day's strong rally of around 6%, the safe-haven precious metal witnessed some profit-taking and for now, seems to have snapped three consecutive days of winning streak amid improving risk sentiment.

The Fed's unprecedented QE program to buy unlimited amounts of Treasury bonds and mortgage-backed securities, along with the US Senate's agreement on a stimulus package boosted investors' confidence and weighed on traditional safe-haven assets.

The risk-on flow was further reinforced by a goodish pickup in the US Treasury bond yields and exerted some additional pressure on the non-yielding yellow metal. However, some follow-through US dollar long-unwinding trade helped limit the downside.

The greenback remained on the defensive amid easing market concerns about tightening liquidity – which had recently underpinned its demand as the global reserve currency – and was seen as one of the key factors lending some support to the dollar-denominated commodity.

Hence, it will be prudent to wait for some strong follow-through selling before confirming that the recent bounce from YTD lows might have already run out of the steam and positioning for any further near-term depreciating move.

Market participants now look forward to the US economic docket, highlighting the release of Durable Goods Orders data for February, in order to grab some short-term trading opportunities later during the early North-American session.

Technical levels to watch