Gold trades with modest gains, just above $1700 mark

  • Gold gained some positive traction on Monday, albeit lacked any strong follow-through.
  • A pickup in the USD demand, the prevalent risk-on mood kept a lid on the early uptick.
  • Speculations for negative Fed rates should help limit any meaningful slide for the metal.

Gold struggled to capitalize on its early uptick, albeit has managed to hold with modest daily gains just above the $1700 mark.

Following the previous session's pullback from two-week tops, the precious metal regained some positive traction on the first day of a new trading week amid worries over the second wave of coronavirus infections.

However, a combination of negative factors – including a pickup in the US dollar demand and the prevalent risk-on mood – held investors from placing any aggressive bets and kept a lid on any further gains for the metal.

As investors looked past Friday's disastrous US NFP report, a goodish pickup in the US Treasury bond yields revived the greenback demand and was seen as a key factor that undermined demand for the dollar-denominated commodity.

This comes on the back of the latest optimism about the re-opening of economies in some part of the world. Adding to this, easing US-China tensions further boosted investors' confidence and dented the precious metal's safe-haven status.

Meanwhile, the downside is likely to remain cushioned amid speculations that the Fed might be forced to push interest rates below zero, which should continue to attract some dip-buying around the non-yielding yellow metal.

From a technical perspective, the commodity on Friday faced rejection near a multi-week-old descending trend-line. This makes it prudent to wait for a convincing break through the mentioned barrier before placing fresh bullish bets.

In the absence of any major market-moving economic releases, the broader market risk sentiment and the USD price dynamics will continue to play a key role in influencing the commodity's momentum/produce some short-term trading opportunities.

Technical levels to watch

Any meaningful slide below the $1700 mark is likely to find decent support and remain limited near the $1685 horizontal support, which if broken might prompt some aggressive technical selling. On the flip side, immediate resistance is pegged near the $1715 region, above which the commodity is likely to aim back towards testing the $1722-24 supply zone.

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