Gold Price Analysis: XAU/USD flirts with session lows, around $1,745 area

• A combination of factors prompted some fresh selling around gold on Friday.
• A sharp spike in the US bond yields benefitted the USD and exerted pressure.
• The prevalent risk-on mood further undermined the safe-haven commodity.

Gold extended its steady intraday descent from five-week tops and refreshed fresh daily lows, around the $1,745-44 region heading into the North American session.

The precious metal witnessed a modest pullback from the vicinity of the $1,760-65 strong resistance and for now, seems to have stalled its recent strong rebound from multi-month lows. As investors looked past a stubbornly dovish Fed, a sharp intraday spike in the US Treasury bond yields turned out to be a key factor that drove flows away from the non-yielding yellow metal.

Meanwhile, rebounding US bond yields allowed the US dollar to stage a goodish recovery from over two-week lows, which exerted some additional downward pressure on the dollar-denominated commodity. Apart from this, the underlying bullish sentiment around the equity markets also did little to lend any support to the safe-haven XAU/USD or stall the intraday corrective slide.

Looking at the fundamental backdrop, investors remain convinced that a relatively faster US economic recovery could force the Fed to raise interest rates sooner rather than later. In fact, the markets have been pricing in a lift-off by the end of 2022. This, in turn, suggests that the XAU/USD might have topped out in the near term and supports prospects for further weakness.

That said, it will still be prudent to wait for some strong follow-through selling below the $1,730 level before traders start positioning for an extension of the ongoing depreciating move. Sustained weakness below the $1,720 level will reaffirm the bearish bias and turn gold vulnerable to challenge the $1,700 mark before dropping to the double-bottom support near the $1,677-76 zone.

Technical levels to watch