Gold holds weaker below $1300 mark ahead of FOMC

   •  A modest USD retracement helps recover early lost ground to over one-week lows.
   •  Subdued US bond yields extend additional support but offset by fading safe-haven demand.
   •  Today’s highly anticipated FOMC decision could help determine the near-term trajectory.

Gold reversed a major part of its early slide to over one-week lows and is now trying to stabilize near the $1294 region. 

Against the backdrop of fading safe-haven demand, a modest pickup in the US Dollar demand kept exerting downward pressure for the second consecutive session on Wednesday and dragged the dollar-denominated commodity to an intraday low near $1292 area. 

However, a sudden fall in the US Treasury bond yields since the early European session extended some support to the non-yielding yellow metal and helped limit deeper losses, at least for the time being. 

Looking at the broader picture, the commodity has been oscillating within a familiar band over the past four weeks or so as investors seemed to wait for clues over the path of interest rates, three or four hikes in 2018, before positioning for the next leg of directional move. 

Hence, today's highly anticipated FOMC decision and the accompanying updated economic projections should play a key role in providing the required momentum and assist the metal to finally break through a narrowing trading range.

Technical levels to watch

Any subsequent weakness is likely to find support near the $1287-86 region before the commodity eventually drops to retest YTD lows, near $1282 level set on May 21. On the upside, $1300 handle might continue to act as an immediate resistance, above which the recovery move could get extended back towards the very important 200-day SMA.

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