Gold (XAU/USD) is attempting to recover and continues to trade near the two-week low reached earlier on Tuesday. Nevertheless, during the first half of the European session, the precious metal maintains a positive tone, holding above the psychologically important $4,000 level. However, it remains vulnerable to further downside, with a potential retest of the yearly low around $3,940, recorded on June 30.

From a technical perspective, gold continues to trade well below the 200-day Simple Moving Average (SMA), maintaining a bearish outlook within a descending channel. At the same time, the MACD histogram has narrowed slightly, indicating weakening bearish momentum. However, the Relative Strength Index (RSI) remains around 39, below the neutral level, confirming that the current recovery remains fragile and does not yet signal a confirmed bullish reversal.

Accordingly, any further upside is likely to encounter selling pressure and remain limited to the $4,100 level. A sustained breakout above this level could trigger additional gains driven by short covering, sending the price toward resistance at the 200-day Exponential Moving Average (EMA), located around $4,220. More sustained buying would pave the way toward the key resistance provided by the 200-day SMA near $4,500, a break above which would weaken the bearish outlook.

On the other hand, key support is located near the yearly low at $3,940. A decisive move back to this area followed by a break below it would open the way for a deeper decline.