Gold surrenders majority of early tepid recovery gains

Gold struggled to build on its tepid recovery move and has now surrendered majority of its early gains to session tops near $1267 region.

A fresh wave of risk-aversion trade, on news report that the US President Donald Trump is being investigated for possible obstruction of justice, benefitted the precious metal’s safe-haven appeal. Adding to this, a subdued US Dollar action extended additional support to dollar-denominated commodities and helped the metal to recover from near three-week lows touched in the previous session. 

Overnight the yellow metal reversed disappointing US macro data-led gains to $1280 region and slumped to its lowest level since May 26 after the Federal Reserve raised interest rates for the second time in three months. The Fed also maintained its outlook of three total rate hikes for this year and said it would start trimming its $4.5 trillion massive balance sheet, which weighed heavily on the non-yielding metal.

The early recovery move, however, lacked any strong follow through momentum, with the metal giving up majority of early gains to currently trade nearly unchanged around $1261 region.

Traders now look forward to the BoE announcement for some volatility in markets, which would derive the metal’s safe-haven demand and provide some trading opportunities. Later during the NA session, second-tier US economic releases would also be looked upon for some short-term trading impetus.

Technical levels to watch

On a sustained weakness back below $1259 level, the metal seems more likely to accelerate the slide towards $1255 support area before eventually dropping below $1250 support to test 100-day SMA support near $1245 region.

Meanwhile on the upside, a strong follow through buying interest beyond $1267 level (session top) could lift the commodity towards $1270 resistance, above which a bout of short-covering has the potential to continue boosting it back towards $1280-81 resistance area.

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