Gold Price Analysis: XAU/USD struggles to capitalize on intraday recovery

Gold struggled to capitalize on its goodish intraday bounce from multi-month lows and was last seen trading with modest gains of around 0.20%, just below the $1730 level.

The precious metal managed to find some support near the $1707 area and staged a modest bounce from the lowest level since mid-June 2020. Given that the recent violent selloff in the US bond market has eased, slightly oversold conditions on short-term charts seemed to be the only factor that prompted some short-covering around the non-yielding yellow metal.

This, along with a cautious mood in the equity markets, extended some additional support to the safe-haven XAU/USD. The supporting factors, to a larger extent, were negated by some follow-through US dollar buying, which tends to undermine demand for dollar-denominated commodity and kept a lid on any meaningful upside for the XAU/USD.

The greenback remained well supported by the upbeat US economic outlook, bolstered by the impressive pace of COVID-19 vaccinations and the progress on a massive US fiscal spending plan. The reflation trade has been fueling doubts that the Fed would retain ultra-low rates for a longer period, which was seen as another factor capping gains for gold.

From a technical perspective, the metal's inability to gain any meaningful traction suggests that the near-term bearish trend might still be far from being over. This makes it prudent to wait for some strong follow-through buying before confirming that the XAU/USD has bottomed out in the near-term and positioning for any further recovery.

There isn't any major market-moving economic data due for release from the US on Tuesday. Hence, the US bond yields, the USD price dynamics and the broader market risk sentiment will play a key role in influencing the XAU/USD.

Technical levels to watch