Gold Price Analysis: XAU/USD recovery looks to US Treasury yields on the way to $1,750

• Gold consolidates recent losses inside a short-term trading range above $1,725.
• US dollar strength fails to stop gold buyers as downbeat bond yields drive safe-haven demand to the yellow metal.
• China’s struggle with the West joins fears of slower economic recovery and tapering to weigh on the mood.
• US GDP, central bankers’ comments will decorate the calendar but risk headlines keep the driver’s seat.

Gold prices waver around $1,735, holds the previous day’s consolidative moves, as Asian traders prepare for Thursday. The yellow metal bounced off $1,723.86 on Wednesday and snapped a two-day losing streak. Though, the upside momentum couldn’t breach the weekly cap surrounding $1,750. While US dollar moves tried to tame the gold buyers, bond waves seemed to have played their role in marking the corrective pullback.

After all, it’s a safe-haven…

Although the US dollar’s rally to the yearly high pushed some at the desk towards doubting the yellow metal’s rebound, the slump in the US 10-year Treasury yields to one week low favored the gold buyers. The US Treasury yields declined for three consecutive days before closing around 1.62%, near the one-week low, which in turn portrayed the market’s fears and drove rush to risk-safety towards the bullion.

Fears of slower economic recovery out of the coronavirus (COVID-19) and tapering of bond purchasing, as well as a rate hike, were among the major challenges to the market sentiment. Also on the negative side were US-China trade war fears and Beijing’s tussles with the Western leaders, comprising the US, the UK, Canada and the European Union (EU).

Furthermore, challenges to the vaccinations and downbeat US figures, coupled with fears from North Korea are extra worries that backed the risk-off mood.

Alternatively, US President Joe Biden’s vaccine optimism joins chatters over a $3.0 infrastructure plan to keep the traders hopeful. On the same side is the news that the US Senate is voting to extend the Paycheck Protection Program (PPP) beyond March expiry. Additionally, Australia’s easing of the covid restrictions and American policymakers’ rush to join links with Western friends, also connecting with ex-China allies in Asia, favors market optimism.

Against this backdrop, Wall Street stayed red by the end of Wednesday’s closing but the US dollar index (DXY) refreshed its yearly high by the same time.

Looking forward, gold traders will keep their eyes on the risk catalysts amid a light calendar in Asia. However, today’s US GDP and comments from European and US policymakers can entertain market players afterward.

Technical analysis

Gold bounces back beyond 21-day SMA but needs a clear run-up above the downward sloping trend line from November, around $1,725 by the press time. Also testing the bullion buyers is the November 2020 bottom surrounding $1,765.