Gold on the defensive, holds above $1700 mark as focus remains on US GDP/FOMC

• Gold struggled to capitalize on the overnight bounce and remained below the $1714-16 supply zone.
• The prevailing risk-on mood seemed to be weighing on the commodity’s perceived safe-haven status.
• A broad-based USD weakness helped limit the downside ahead of the US GDP, FOMC policy decision.

Gold edged lower during the early European session and refreshed daily lows, albeit has managed to hold above the $1700 round-figure mark.

The precious metal failed to capitalize on the previous day's goodish intraday bounce from the $1690 support area and once again started retreating from the $1714-16 supply zone.

The latest optimism over the slowing spread of the coronavirus and a move to re-open economies in some parts of the world remained supportive of the prevailing upbeat market mood.

This comes amid a strong follow-through recovery in crude oil prices, which further boosted investors' confidence and dented the precious metal's perceived safe-haven status.

Meanwhile, some renewed US dollar weakness failed to provide any impetus, though might turn out to be a key factor that might extend some support to the dollar-denominated commodity.

Investors might also be reluctant to place any aggressive bets, rather prefer to wait on the sidelines ahead of Wednesday's release of the US GDP and the latest FOMC policy decision.

The advance US GDP report is expected to show that the economic activity contracted sharply by 4.0% annualized pace during the first quarter of 2020 amid coronavirus lockdowns.

The data, however, to a larger extent, is likely to be overshadowed by the outcome of the very important FOMC policy meeting and the Fed Chair Jerome Powell's press conference.

Investors will look for clues about the Fed's future policy path, which should play a key role in determining the next leg of a directional move for the non-yielding yellow metal.

Technical levels to watch