Gold eases from two-week tops, still well bid above $1960 level

• Gold gained some follow-through traction for the second straight session on Tuesday.
• The uptick was well supported by the heavily offered tone surrounding the greenback.
• The prevalent risk-on environment might cap gains ahead of the FOMC on Wednesday.

Gold climbed to two-week tops, around the $1969 region during the early European session, albeit lacked any strong follow-through and quickly retreated around $8-10 thereafter.

The precious metal built on the previous day's positive move and gained some follow-through traction for the second consecutive session on Tuesday. The heavily offered tone surrounding the US dollar was seen as a key factor that benefitted the dollar-denominated commodity.

However, the prevalent risk-on environment undermined the metal's safe-haven demand. The latest optimism over a potential COVID-19 vaccine remained supportive of the upbeat market mood, which got an additional boost from Tuesday's better-than-expected Chinese macro data.

Apart from this, a modest pickup in the US Treasury bond yields further collaborated towards capping any strong gains for the non-yielding yellow metal. Investors also seemed reluctant to place aggressive bets ahead of the FOMC monetary policy decision on Wednesday.

This makes it prudent to wait for some strong follow-through buying beyond the $1670-72 supply zone before traders start positioning for a further near-term appreciating move.

In the meantime, market participants will look forward to the US economic releases – the Empire State Manufacturing Index and Industrial Production – for some impetus. Heading into Wednesday's key event risk, the data is unlikely to be a major game-changer for the commodity.

Technical levels to watch