Gold flirting with session lows, below $1225

Gold once again failed to build on its recovery move beyond $1230 level and has now dropped to session lows, eroding previous session's tepid recovery gains.

On Wednesday, the previous metal rebounded after hitting fresh eight-week lows and recovered some of its steep losses posted on Monday following the release of FOMC meeting minutes, which showed that policymakers were concerned over the recent sluggish inflation indications. 

   •  FOMC Minutes: Low inflation no deterrent to further tightening – HSBC

Adding to this, a weaker trading sentiment around Asian equity markets on escalating geopolitical tensions around the Korean peninsula provided a minor boost to metal's safe-haven appeal and collaborated to an early minor uptick on Thursday. 

However, indications that the Fed could start shrinking its massive balance sheet by September was seen lending support to the US Treasury bond yields and capped further recovery for the non-yielding yellow metal. Moreover, a modest pickup in the US Dollar demand further weighed on dollar-denominated commodities and dragged the metal to session lows near $1224 level. 

   •  US Dollar Index firmer above 96.00 ahead of ADP, ISM

Investors now look forward to today's release of ADP report on the US private sector employment, which is seen as a precursor to Friday's official jobs report (NFP), and hence, might provide fresh impetus later during early NA session.

Technical levels to watch

Immediate support is pegged near $1220 area, below which the metal could extend its downward trajectory further towards $1207-06 intermediate support en-route $1200 round figure mark.

On the upside, $1230 level remains immediate strong supply zone, which is closely followed by resistance at the very important 200-day SMA near $1233-35 region. A convincing break through $1235 resistance might trigger a short-covering rally initially to $1241-42 resistance ahead of $1250 important barrier.