Gold Price Analysis: XAU/USD slides below $1730 level, erases Tuesday’s modest gains

Gold witnessed some selling during the early European session and refreshed daily lows, around the $1727 region in the last hour.

The precious metal failed to capitalize on the previous day's goodish rebound from multi-month lows, instead met with some fresh supply on Wednesday and was pressured by a combination of factors. The upbeat global economic outlook remained supportive of the underlying bullish tone in the financial market. This was evident from a fresh leg up in the equity markets, which undermined demand for the safe-haven XAU/USD.

Investors remain optimistic amid the impressive pace of COVID-19 vaccinations and the progress on US President Joe Biden's $1.9 trillion pandemic relief package. The reflation trade has been fueling expectations for a possible uptick in inflation and raised doubts that the Fed would retain ultra-low interest rates for a longer period. This was seen as another factor that exerted some pressure on the non-yielding yellow metal.

Meanwhile, a modest uptick in the US Treasury bond yields extended some support to the US dollar, which further contributed to the offered tone surrounding the dollar-denominated commodity. It will now be interesting to see if the XAU/USD is able to attract any buying at lower levels or the emergence of some fresh selling on Wednesday supports prospects for an extension of the recent/well-established bearish trend.

Market participants now look forward to the US economic docket, highlighting the release of the ADP report on private-sector employment and ISM Services PMI. This, along with the US bond yields, might influence the USD price dynamics. Traders might further take cues from the broader market risk sentiment to grab some short-term opportunities.

Technical levels to watch