Gold soars to nearly 7-week highs amid weaker USD and risk-off mood

Gold continued scaling higher for the third consecutive session and soared to near 7-week highs during early European session on Tuesday.

Strong selling pressure around the greenback, with the key US Dollar Index tumbling to fresh multi-month lows near mid-96.00s, was seen benefitting the dollar-denominated commodity. 

Against the backdrop of recent US economic data-disappointment, investors now seemed convinced that the Fed is more likely to pause after an eventual rate-hike action on June 14. Hence, fading expectations of faster Fed rate-tightening cycle, also evident from a sharp slide in the US treasury bond yields, was also seen lending additional support to the non-yielding yellow metal.

Adding to this, a fresh wave of global risk-aversion trade, as depicted by weaker trading sentiment around equity markets, provided an additional boost to traditional safe-haven assets and contributed to the precious metal's strong up-surge to the highest level since April 19.

Today's US economic docket lacks any major market moving releases and hence, deteriorating investors’ appetite for riskier assets and weaker sentiment surrounding the USD might continue to boost the commodity further towards yearly tops touched on April 17.

Technical levels to watch

Bulls would be eyeing to retest multi-month highs resistance near $1294-95 region, above which the commodity seems all set to surpass the $1300 handle and head towards testing its next resistance near $1307 level.

On the flip side, any retracement back below $1285-84 immediate support now seems to find strong support near $1278 level, below which the metal is likely to drift back towards $1268 strong horizontal support.