Gold's recovery loses steam ahead of $1230 as Wall Street records large gains

After dropping to a 2-day low at $1218, the XAU/USD pair took advantage of the broad-based USD weakness and gained traction to turn positive on the day. However, an improved market sentiment in the early NA session capped the pair's upside and it was last seen trading at $1229, where it was up $4.5, or 0.4%, on the day.

The data released by Markit on Tuesday revealed that the manufacturing PMI improved to 55.5 in July in its preliminary reading to come in slightly above the market expectation of 55.4. On the other hand, the service PMI eased to 56.2 in July from 56.5 in June to fall short of the market expectation of 56.5. A separate report released by the Richmond Fed showed that the Manufacturing Index remained steady at 20 in July.

Following the mixed macroeconomic data releases from the U.S., the US Dollar Index came under a modest selling pressure and dropped to a daily low near $1240 to provide some fuel to the XAU/USD's rise.

However, boosted by Google's upbeat earnings figures that were released after the closing bell on Monday, major equity indexes started the day on a positive note and extended their gains to reflect an improved market sentiment in the early NA session. The traditional safe-haven gold is now having a difficult time finding demand as the Dow Jones Industrial Average and the S&P 500 are adding 0.9% and 0.6% respectively.

Technical outlook

The pair could encounter the initial resistance at $1235 (Jul. 23 high) ahead of $1243 (20-DMA) and $1249 (Jul. 12 high). On the downside, supports are located at $1222 (Jul. 23 low), $1211 (Jul. 19 low) and  $1200 (psychological level).