Gold Price Analysis: XAU/USD trades with modest losses just below $1,740 level

Gold edged lower during the Asian session and was last seen hovering near the lower boundary of its intraday trading range, just below the $1,740 level.

The precious metal failed to capitalize on Friday's bounce from the $1,730 support zone, instead met with some fresh supply on the first day of a new trading week. This marked the second consecutive day of a negative move and was exclusively sponsored by a modest pickup in the US dollar demand, which tends to weigh on the dollar-denominated commodity.

The USD found some support after Fed Chair Jerome Powell – during an interview with 60 Minutes – said that the US economy is set to make a turnaround and increased growth should provide more jobs. The comments added to the narrative of a relatively faster US economic recovery from the pandemic, thanks to the impressive pace of coronavirus vaccinations.

Powell further added that the Fed wants inflation moderately above 2% for some time but does not want it to go materially above 2% and return to the bad, old inflation days. The optimistic US economic outlook, along with US President Joe Biden's over $2 trillion infrastructure spending plan has been fueling speculations about an uptick in US inflation.

This, in turn, raised doubts that the Fed would retain ultra-low interest rates for a longer period. Hence, the focus now shifts to the latest US consumer inflation figures, due on Tuesday. The data will influence the market expectations about the Fed's next policy move, which should play a key role in determining the near-term trajectory for the non-yielding yellow metal.

Meanwhile, the negative factor, to a larger extent, was offset by a softer tone surrounding the US Treasury bond yields and a slight deterioration in the global risk sentiment. This turned out to be a key factor that extended some support to the safe-haven XAU/USD and might help limit any further losses, warranting some caution for aggressive bearish traders.

Technical levels to watch