Gold corrects after recent rally to 3-week highs, dips below $1240

Haresh Menghani FXStreet

Gold took a breather after its recent upsurge and traded with minor losses on Wednesday, snapping three consecutive days of winning streak to near three week tops.

A modest US Dollar demand from multi-month lows was seen weighing on the dollar-denominated commodities - like gold. This coupled with a pickup in the US Treasury bond yields further dented demand for the non-yielding precious metal.

Moreover, a slight improvement in investors' appetite for riskier assets, as depicted by positive trading sentiment around European equity markets, did little to extend any support to traditional safe-haven assets and dragged the yellow metal to session lows near $1237 region.

• US: White House political setbacks starting to bite for the USD - ING

Further downside, however, is likely to be limited amid fresh political jitters coming out of the world's largest economy and hence, any retracement back towards the very important 200-day SMA would now be looked upon as buying opportunity.

Technical levels to watch

Immediate support is pegged near $1235 level, below which the metal is likely to aim towards testing the 200-day SMA support near $1230 region. On the flip side, momentum above $1241-42 area now seems to confront resistance at 100-day SMA near $1247 region, above which a fresh bout of short-covering has the potential to continue boosting the commodity back towards $1257-58 strong horizontal hurdle.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.