• A combination of factors kept exerting downward pressure on Tuesday.
• Short-covering helps rebound sharply and recover a major part of early losses.
Gold continued losing ground through the mid-European session and tumbled to a one-week low in the last hour, albeit quickly recovered thereafter.
The precious metal extended overnight retracement slide from near two-week tops and was further weighed down by a combination of factors. Resurgent US Dollar demand was seen as one of the key factors prompting some fresh selling around dollar-denominated commodities - like gold.
This coupled with positive trading sentiment around European equity markets, pointing to improving risk appetite, further dented the precious metal's safe-haven appeal. The risk-on mood was reinforced by an uptick in the US Treasury bond yields, which exerted some additional downward pressure on the non-yielding yellow metal.
Meanwhile, the latest leg of sharp rebound over the past hour or so lacked any obvious catalyst and hence, it remains to be seen if the up-move is backed by any genuine buying or is solely led by some short-covering amid absent market moving economic releases from the US.
Technical levels to watch
Any subsequent up-move is likely to confront fresh supply near $1260 level, above which the commodity is likely to aim back towards retesting overnight swing high resistance near the $1265-66 region.
On the flip side, the $1247-46 region might continue to protect the immediate downside, which if broken might turn the metal vulnerable to slide back towards challenging YTD lows support near the $1238 area.
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