Gold drops to 4-hr 100-MA as fears of immediate "Spexit" dispelled

Gold (XAU/USD) retreated from $1294 to $1284 levels in Asia as haven demand dropped after premier Carles Puigdemont pulled back from the brink of a full-blown unilateral declaration of independence for Catalonia and opened doors for last minute negotiations.

At the time of writing, the metal was trading at the 4-hour 100-MA level of $1287.60. The dips below the moving average have been short lived in the late NY session and Asian session.  Helping the prices were comments from Fed's Kaplan that the central bank needs evidence on progress of inflation.

The bid tone may strengthen if speculation that Trump's tax reform plan has hit a roadblock gathers pace in Europe. Still, caution is advised as Fed minutes may lift the USD and kill the gold rally. Kathy Lien from BK Asset Management writes, " The last time the Federal Reserve met, they focused on the improvements in the economy, downplayed the impact of the hurricanes and confirmed their plans to raise interest rates one more time in 2017 and three times in 2018.  The dollar soared against all major currencies and we expect the FOMC minutes to help the dollar by reinforcing this hawkishness." 

Gold is likely to take cues from the action in the US 10-year treasury yield (pre and post Fed minutes), which is showing signs of exhaustion near 2.4%.

Gold Technical Levels

A strong rebound from the 4-hour 100-MA level of $1287 has the potential to push the prices to $1300 mark, above which the momentum could get extended towards $1308-09 horizontal resistance.

On the flip side, $1284 level now seems to protect the immediate downside, which if broken would expose the 5-DMA level of $1282 and 100-DMA support near the $1275. 37 region.