Gold drops to over 2-week lows on firmer USD

   •  USD strength/rising bond yields keeps exerting downward pressure.
   •  Risk-off mood lending some support and might help limit downfall.
   •  Investors look forward to the Fed decision for fresh directional impetus.

Gold extended its losses for the fourth consecutive session on Monday and dropped to over 2-week lows in the last hour.

A follow-through US Dollar buying interest has been one of the key factors exerting downward pressure on dollar-denominated commodities - like gold. This coupled with a goodish pickup in the US Treasury bond yields, amid expectations for an imminent Fed rate hike move this week, was further seen driving flows away from the non-yielding yellow metal.

The precious metal's downfall at the start of a new trading week could also be attributed to some technical selling, especially after Friday's bearish break below a one-week-old trading range. Hence, a fall towards testing the very important 200-day SMA support, currently near the $1305 region, now looks a distinct possibility.

Investors, however, are likely to refrain from placing any aggressive bets and might prefer to wait for the passage of this week's key event risk - the highly anticipated FOMC decision, before positioning for the commodity's next leg of directional move.  

Meanwhile, a fresh wave of global risk aversion trade, as depicted by a sea of red across global equity markets, was seen lending some support to the precious metal's safe-haven appeal and might also contribute towards limiting further downfall, at least for the time being.

Technical levels to watch

The $1305 region (200-DMA), closely followed by the $1300 handle, might continue to act as immediate support levels, below which the metal could slide towards 100-day SMA support near the $1290 region. 

On the upside, $1313 area now seems to have turned as an immediate resistance, which if cleared might trigger a short-covering bounce and lift the commodity back towards $1320-22 supply zone.