• Gold struggles to preserve early gains to a one-week low and turns lower for the second straight day.
• Hawkish Fed expectations, rising US bond yields, resurgent USD demand exert downward pressure.
• The risk-on impulse overshadows recession fears and fails to lend support to the safe-haven XAU/USD. 

Gold witnessed an intraday turnaround from a one-week high, around the $1,727 region touched earlier this Tuesday and turns lower for the second successive day. Spot prices refresh daily low during the early North American session, albeit have managed to hold above the $1,700 round-figure mark.

The risk-on impulse - as depicted by a generally positive tone around the equity markets - turns out to be a key factor that failed to assist the safe-haven gold to capitalize on its early positive move. Apart from this, the emergence of fresh US dollar buying attracts fresh selling around the dollar-denominated commodity and contributes to the intraday decline.

In fact, the USD Index has shot back closer to a two-decade high touched earlier this week and remains well supported by hawkish Fed expectations. Investors seem convinced that the Fed will continue to tighten its monetary policy more aggressively to tame inflation. Moreover, the current market pricing indicates a greater chance of a 75 bps rate hike in September.

This, in turn, triggers a fresh leg up in the US Treasury bond yields, which provides an additional lift to the buck and contributes to driving flows away from the non-yielding gold. That said, growing recession fears, along with economic headwinds stemming from fresh COVID-19 curbs in China, might keep a lid on the optimistic move and lend support to the precious metal.

Nevertheless, the bias still seems tilted in favour of bearish traders and supports prospects for a further depreciating move. Some follow-through selling below the $1,700 mark will reaffirm the negative outlook and make gold vulnerable to retesting last week's swing low, around the $1,689 region, before eventually dropping to the $1,680 area, or the YTD low touched in July.

Technical levels to watch