Gold Price Analysis: XAU/USD retreats further from two-week tops, weakens to $1,780 area

Gold maintained its offered tone through the first half of the European session and was last seen hovering near the lower end of its daily trading ran  |  04/05/2021 11:08
  • Gold witnessed some selling on Tuesday and eroded a part of the overnight gains to two-week tops.
  • Resurgent USD demand, a modest pickup in the US bond yields exerted some pressure on the metal.

Gold maintained its offered tone through the first half of the European session and was last seen hovering near the lower end of its daily trading range, just above the $1,780 level.

The precious metal continued with its struggle to reclaim the $1,800 mark and witnessed some fresh selling on Tuesday, eroding a part of the previous day's strong positive move to over one-week tops. The pullback was sponsored by resurgent US dollar demand, which tends to dent demand for the dollar-denominated commodity.

As investors looked past Monday's softer US ISM Manufacturing PMI, the USD managed to regain traction amid the optimistic outlook for the US economy. The narrative was reaffirmed by Fed Chair Jerome Powell's optimistic comments on Monday, saying that the US economy is gradually recovering from the COVID-19 crisis.

The USD was further underpinned by a modest pickup in the US Treasury bond yields, which was seen as another factor that drove flows away from the non-yielding yellow metal. Apart from this, the underlying bullish sentiment in the financial markets also did little to lend any support to the safe-haven XAU/USD.

Meanwhile, repeated failures near the $1,800 mark warrant some caution for bullish traders and make it prudent to wait for some follow-through buying before positioning for any appreciating move. That said, the downside is likely to remain cushioned ahead of Friday's release of the closely-watched US monthly jobs report (NFP).

In the meantime, traders might take cues from Tuesday's US economic docket – featuring the release of Trade Balance and Factory Orders data. This, along with the US bond yields, might influence the USD price dynamics. Apart from this, the broader market risk sentiment might also produce some trading opportunities around the XAU/USD.

Technical levels to watch

 

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