Gold Price Analysis: XAU/USD drops to $1,765-60 support zone, seems vulnerable

• Gold dropped back closer to over one-week lows touched in the previous day.
• A pickup in the US bond yields benefitted the USD and prompted some selling.
• Upbeat US GDP, risk-on mood further undermined the safe-haven commodity.

Gold witnessed some selling during the early European session and dropped to the $1,765 region, back closer to over one-week lows touched on Wednesday.

A combination of factors failed to assist the precious metal to capitalize on its intraday positive move, instead prompted some fresh selling around the $1,790 region. The underlying bullish sentiment in the financial markets acted as a headwind for the safe-haven XAU/USD and capped the early uptick

Despite worries about the continuous surge in new COVID-19 cases in some countries, investors remain optimistic about the prospects for a strong global economic recovery. Adding to this, US President Joe Biden's $1.8 trillion package for families and education further boosted investors' confidence.

The intraday downtick could further be attributed to a modest US dollar rebound from over two-month lows. A stronger USD tends to dent demand for dollar-denominated commodities, including gold. A strong pickup in the US Treasury bond yields seemed to be the only factor lending support to the buck.

The USD bulls seemed rather unimpressed by Thursday's release of the Advance US GDP report, which showed that the world's largest economy expanded by 6.4% annualized pace in the first quarter. This was well above the 4.3% rise recorded in the previous quarter and better than market expectations.

Meanwhile, the emergence of some fresh selling suggests that the market has already digested the Fed's dovish message. This, in turn, supports prospects for some meaningful downside for the non-yielding yellow metal. Sustained weakness below the $1,765-60 region will reaffirm the bearish outlook.

Technical levels to watch