GOLD held on to the strong recovery gains and was placed near the top boundary of its daily trading range, just below the $1,710 level during the mid-European session. The XAU/USD has now erased the previous day's losses to nine-month lows, though a combination of factors should keep a lid on any further recovery.
Adding to this, the underlying bullish sentiment in the financial markets – as depicted by a positive tone around the equity markets – might further collaborate to cap gains for the safe-haven XAU/USD. This makes it prudent to wait for some follow-through buying before confirming that the non-yielding yellow metal has bottomed out in the near-term.
From a technical perspective, gold is wavering within a potential two-week-old bearish channel formation on the 4-hourly chart which is challenging bullish traders. If the candlestick closes above that level could boost the renewed upside, calling for a test of the strong hurdle at $1,717. Acceptance above the critical resistance could validate a bearish channel breakout, opening doors for a test of the support breakout level at $1,760
Alternatively, $1,680 offers an immediate cushion, below which the falling trendline support at could be put at risk. A sharp sell-off towards the $1,650 psychological level cannot be ruled out if the bulls fail to resist above the June 2020 low near $1,670.