• Gold regains positive traction on Monday amid retreating US bond yields, a weaker USD.
• The risk-on impulse, along with hawkish Fed expectations, should cap any further gains.
• The market focus would remain glued to the US consumer inflation data on Wednesday.

Gold manages to attract fresh buying on Monday and builds on its steady intraday ascent through the early North American session. The XAU/USD climbs to a fresh daily high, around the $1,786-$1,787 region in the last hour and has now reversed a major part of Friday's post-NFP losses.

The US dollar comes under some renewed selling pressure on the first day of a new week and turns out to be a key factor lending support to the dollar-denominated gold. The market reaction to the upbeat US monthly jobs data released on Friday fades rather quickly amid a fresh leg down in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond slips back below the 2.80% mark, which keeps the USD bulls on the defensive and further seems to benefit the non-yielding yellow metal.

That said, a combination of factors might hold back bulls from placing fresh bets around gold and cap any further gains. The risk-on impulse could act as a headwind for the safe-haven XAU/USD amid speculations that the Fed would stick to its aggressive policy tightening path. The bets were lifted by the blockbuster headline US NFP print, showing that the economy added 528K jobs in July. Adding to this, higher-than-expected wage growth data suggested a further rise in inflationary pressures.

Hence, the market focus now shifts to the latest US consumer inflation figures, scheduled for release on Wednesday. The data would influence Fed rate hike expectations and play a key role in driving the near-term USD demand, which, in turn, should help determine the next leg of a directional move for gold. In the meantime, the US bond yields, the USD price dynamics and the broader risk sentiment would be looked upon for some impetus amid absent relevant market-moving economic releases from the US.

Technical levels to watch