Gold trades with modest losses around $1720 level, downside seems limited

• Gold edged lower on Wednesday amid the prevalent upbeat market mood.
• Rising in COVID-19, geopolitical tensions might help limit any deeper losses.
• Sliding US bond yields, weaker USD could attract dip-buying at lower levels.

Gold traded with a mild negative through the early European session, albeit remained well within this week's broader trading range.

The upbeat market mood was seen as one of the key factors exerting some downward pressure on the safe-haven precious metal. However, a softer US dollar, along with concerns about a second wave of the coronavirus cases and geopolitical tensions might help limit deeper losses for the commodity.

The global risk sentiment remained well supported by the Fed's announcement to start purchasing of investment-grade US corporate bonds, report that the Trump administration was contemplating a $1 trillion infrastructure spending and a positive breakthrough in the fight against the coronavirus.

However, a sharp rise in the coronavirus infections in the US and the risk of a further escalation of geopolitical tensions in Asia held investors from placing aggressive bearish bets. Tensions in the Korean peninsula intensified after North Korea on Tuesday blew up a joint liaison office.

Separately, both Indian and China suffered casualties in clashes at a disputed Himalayan border area. However, a weaker tone around the USD, possibly on the back of a fresh leg down in the US Treasury bond yields, could extend support to the dollar-denominated commodity, rather attract some dip-buying.

Hence, it will be prudent to wait for some strong follow-through selling before positioning for any further near-term depreciating move. Immediate support is pegged near the $1716-15 region and is followed by the weekly swing lows, around the $1704 level ahead of the $1700 round-figure mark.

Moving ahead, market participants now look forward to the release of the US housing market data – Building Permits and Housing Starts. Later during the US session, the Fed Chair Jerome Powell's second day of testimony might further contribute towards producing some meaningful trading opportunities.

Technical level to watch