The recent bounce in the bullion was witnessed due to a sudden plunge in the greenback across the board
Gold prices dipped to fresh nine-month lows around $1,707 on Tuesday before bouncing later in the day. However, the bullion still lacks recovery momentum while seeing a slight bearish intraday bias today. On the upside, bullish attempts are now capped by the $1,740 region while in a wider picture, a significant barrier is represented by the descending 20-DMA, today at $1,791.
Yesterday’s bounce was witnessed due to a sudden plunge in the greenback across the board at London fixing. There were no particular drivers behind the sell-off, so traders were probably taking profit following the recent gains that took the US currency to multi-week highs.
In general, the mid-term outlook for the yellow metal still looks fragile, with downside risks persisting. Now, the prices need to hold above the $1,700 figure in order to avoid a more aggressive sell-off towards fresh multi-month lows.
In the longer term, bullish potential looks limited as well against the backdrop of a brightening outlook for economic recovery due to the ongoing vaccine rollouts, government and central banks’ stimulus, and the receding pandemic.
In the immediate term, the bullion could resume bullish attempts but it looks like the metal will likely finish the day in the red as upbeat risk sentiment is back in the global markets while the downside pressure surrounding the dollar is easing somehow.
From the technical point of view, gold needs to make a decisive break above the mentioned $1,740 area in order to see a more sustained and robust recovery towards the $1,800 handle. Now, as the daily RSI has bounced from the oversold territory while looking directionless, it looks like the precious metal could see short-term consolidation in the $1,730-$1,740 region before deciding on a further direction.