Gold Price Analysis: XAU/USD sticks to modest gains above $1715, lacks follow-through

• The risk-off mood prompted some short-covering around the safe-haven gold on Thursday.
• An uptick in the US bond yields underpinned the USD and capped gains for the commodity.
• Investors now look forward to Fed Chair Jerome Powell’s speech for a fresh trading impetus.

Gold held on to its modest gains heading into European trading, albeit lacked any strong follow-through buying. The commodity was last seen hovering around the $1717 region, up around 0.10% for the day.

Having defended the $1700 mark in the previous day, the precious metal managed to regain some positive traction on Thursday amid a weaker trading sentiment around the equity markets. The overnight sell-off in the US Treasuries raised fears about distressed selling in other asset classes and took its toll on the global risk sentiment. This, in turn, prompted some short-covering around the safe-haven XAU/USD amid slightly oversold conditions.

However, a combination of factors held bulls from placing aggressive bets and capped gains for the commodity. The US bond market continued reacting to the prospects for a relatively faster US economic recovery and a possible uptick in inflation. The reflation trade raised bouts that the Fed would retain ultra-low interest rates for a longer period, which should keep a lid on any meaningful upside for the non-yielding yellow metal.

The upbeat US economic outlook was driven by the progress on coronavirus vaccinations and a massive US fiscal spending plan. This, along with an uptick in the US bond yields, extended some support to the US dollar and further weighed on the dollar-denominated commodity. This makes it prudent to wait for some strong follow-through buying before confirming that the XAU/USD has bottomed out and positioning for any noticeable recovery in the near-term.

Apart from this, investors also seemed reluctant, rather preferred to wait on the sidelines ahead of the Fed Chair Jerome Powell's scheduled speech later during the North American session. Powell's comments on the risk of a rapid rise in long-term borrowing costs will play a key role in influencing the XAU/USD and assist investors to determine the near-term trajectory.

Technical levels to watch