Gold drops below $1260 as greenback extends correction

After rising above the $1260 mark in the early NA session, the XAU/USD pair lost its traction and turned negative on the day. As of writing, the pair was down $2.5, or 0.2%, at $1257. Despite this modest pullback, the pair remains on track to record its highest weekly close in more than six months.

Earlier today, the data published by the U.S. Bureau of Economic Analysis showed that the third estimate of the third-quarter GDP growth ticked down to 3.4% from 3.5% on a yearly basis and the annual core PCE price index, the Fed's preferred gauge of inflation, rose to 1.9% in November as expected. Following a muted reaction to these data, comments from New York Fed President Williams helped the T-bond yields turn north and provided a boost to the greenback.

In an interview with CNBC, Williams said that although 2 more rate hikes in 2019 made sense, further rate increases were neither a promise or a commitment. Commenting on the FOMC's policy statement, Williams argued that the change in the language was suggesting that the Committee was more open to adjustments to the policy. As of writing, the DXY was up 0.4% on the day at 96.80.

On the other hand, following a positive start to the day, major equity indexes in the U.S. failed to take advantage of Williams' dovish remarks and extended their slide in the session. Concerns over a government shutdown could be weighing on the sentiment. President Trump recently told reporters that there would probably be a government shutdown and added that they were prepared for a "long shutdown." At the moment, the Dow Jones Industrial Average is down 0.72% on the day while the Nasdaq Composite is losing 2.4%.

Technical levels to consider

The pair could face the first resistance at $1262 (daily high) ahead of $1266 (Dec. 20 high) and $1270 (50-WMA). On the downside, supports are located at $1255 (daily low), $1242 (Dec. 20 low) and $1236 (200-DMA).