Gold Price Analysis: XAU/USD clings to strong recovery gains above $1700 mark

Gold held on to the strong recovery gains and was placed near the top boundary of its daily trading range, just below the $1710 level during the mid-European session.

The US bond yields retreated further from over one-year tops touched last week amid expectations that the Fed will take some action to curb the rapid rise in long-term borrowing cost. This prompted traders to lighten their bullish US dollar bets, which, in turn, triggered a short-covering bounce around the dollar-denominated commodity.

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. The passage of a massive US fiscal spending bill lifted the prospects for a relatively faster US economic recovery from the pandemic and should help limit any meaningful slide for the greenback.

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.

There isn't any major market-moving economic data due for release from the US on Tuesday, leaving the USD bulls at the mercy of the US bond yields. Apart from this, the broader market risk sentiment would influence the safe-haven commodity and further assist traders to grab some short-term opportunities.

Technical levels to watch