Gold recovery loses steam ahead of $1200

• Gold bears take a breather on Tuesday.
• US Dollar Index struggles to find direction.
• Improved sentiment makes it difficult for safe-havens to gather strength.

After breaking below the critical $1200 handle and closing the day $20 lower on Monday, the XAU/USD is staging a modest recovery on Tuesday. However, it seems like the majority of buyers are waiting for the pair to break above $1200 before committing to a deeper recovery. At the moment, the pair is up 0.2% on the day at $1196.

Despite the risk-off mood that dominated the markets in the past few days, the precious metal failed to find demand as markets remained focused on the broad-based greenback strength. With fears of the Turkish economic crisis spilling over into Europe and having a negative impact on the global economic expansion easing, the USD rally lost its traction on Tuesday and allowed major currencies and commodities retrace their recent losses vs. the buck. As of writing, the US Dollar Index was up 0.02% on the day at 96.35.

The data from the United States on Tuesday showed that import prices stayed unchanged on a monthly basis in July following June's 0.1% decline and export prices fell 0.5%. Nonetheless, these numbers didn't have an apparent impact on the greenback's market valuation.

In the meantime, major equity indexes in the U.S. started the day modestly higher to reflect the improved market sentiment. There won't be any other macroeconomic data releases in the remainder of the day and markets will be watching the critical $1200 mark.

Technical levels to consider

With a daily close above $1200 (psychological level), the pair could extend its recovery towards $1212 (Aug. 13 high) and $1218 (20-DMA). On the downside, supports are located at $1192 (daily low/Aug. 13 low), $1185 (Jan. 26, 2017, high) and $1180 (Jan. 27, 2017, low).