Gold Price Analysis: XAU/USD remains confined in a range around $1,770 level

• Gold struggled to capitalize on the previous day’s bounce from two-week lows.
• A modest USD strength was seen as a key factor that capped gains for the metal.
• A softer risk tone, dovish Fed held bears from placing bets and help limit losses.
• The technical set-up supports prospects for an extension of the recent pullback.

Gold witnessed a subdued/rangebound price action on Friday and remained confined in a range, around the $1,770 region through the early part of the European session.

A combination of diverging forces failed to provide any impetus, or assist the precious metal to build on the overnight bounce from the $1,756 area or two-week lows. The US dollar strengthened a bit for the second straight session on Friday and recovered further from the lowest level since February 26. This was seen as a key factor that capped any meaningful upside for dollar-denominated commodities, including gold.

The negative factor, to a larger extent, was offset by a softer tone around the equity markets, which tends to benefit the safe-haven XAU/USD. Investors now seem worried that surging COVID-19 cases in some countries – India, Japan and Brazil – could derail the global economic recovery from the pandemic. This, along with the slowing pace of growth in the Chinese manufacturing sector, took its toll on the global risk sentiment.

Apart from this, the Fed's reassurance to keep interest rates low for a longer period might further act as a tailwind for the non-yielding yellow metal and help limit deeper losses. It is worth recalling that the US central bank refrained from giving any hint about QE tapering, instead, Fed Chair Jerome Powell reiterated that substantial progress is needed before talking about scaling back the massive bond purchases.

From a technical perspective, the recent failure near the $1,800 mark and the overnight slide below the $1,765-60 support zone might have shifted the bias in favour of bearish traders. Hence, any intraday positive move is more likely to be seen as a selling opportunity and runs the risk of fizzling out rather quickly. The XAU/USD now seems vulnerable to slide back to test the $1,700 mark in the near term.

Market participants now look forward to the US economic docket, featuring the release of March Personal Income/Spending data, Core PCE Price Index and revised Michigan Consumer Sentiment Index for April. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the XAU/USD. Traders might further take cues from the broader market risk sentiment for some short-term opportunities.

Technical levels to watch