Gold held on to the strong recovery gains and was placed near the top boundary of its daily trading range, just below the $1710 level during the mid-European session. The US bond yields retreated further from over one-year tops touched last week amid expectations that the Fed will take some action to curb the rapid rise in long-term borrowing cost. This prompted traders to lighten their bullish US dollar bets, which, in turn, triggered a short-covering bounce around the dollar-denominated commodity.

The XAU/USD has now erased the previous day's losses to nine-month lows, though a combination of factors should keep a lid on any further recovery. The passage of a massive US fiscal spending bill lifted the prospects for a relatively faster US economic recovery from the pandemic and should help limit any meaningful slide for the greenback.