Gold corrects from multi-week tops, slides further below $1650 level

Gold finally broke down of its Asian session consolidation phase and dropped to fresh session lows, around the $1645 region in the last hour.

The commodity failed to capitalize on its early uptick to the $1674 region, or near four-week tops and witnessed a modest intraday pullback. A further improvement in the global risk sentiment, as depicted by some strong follow-through positive move in the equity markets, was seen exerting some pressure on traditional safe-haven assets, including gold.

The risk-on mood was supported by the latest optimism over falling number of COVID-19 cases from the United States, Italy and Spain. This was further reinforced by a strong rally in the US equity markets, which further contributed towards driving flows away from the non-yielding yellow metal and contributed to the intraday slide.

Meanwhile, a weaker tone surrounding the US dollar, which tends to undermine demand for the dollar-denominated, might turn out to be the only factor that might help limit any deeper losses. Hence, it will be prudent to wait for some strong follow-through selling before confirming that the recent rally might have already run out of the steam.

As investor look for further signs that the pandemic may be reaching its peak, the broader market risk sentiment might continue to play a key role in influencing the commodity's momentum on Tuesday in the absence of any major market-moving economic releases from the US.

Technical levels to watch