Gold off lows, still in red below $1200 mark

   •  Struggles to build on overnight goodish rebound from over two-week lows.
   •  Renewed USD buying/risk-on mood kept a lid on any meaningful up-move.
   •  Fed rate hike expectations further collaborated towards capping gains.

Gold traded with a mild negative bias through the mid-European session on Wednesday, albeit has managed to reverse an early dip to $1193 area. 

After hitting over two-week lows on Tuesday, the precious metal caught some strong bids and staged a solid rebound. Optimism over a deal to renew the NAFTA trade pact triggered a modest US Dollar retracement during the US trading session and prompted some short-covering move.

However, a combination of negative factors, ranging from some renewed USD buying interest and the prevalent risk-on mood, kept a lid on any meaningful follow-through up-move for the dollar-denominated commodity. The market belief that the US has less to lose from global trade conflicts has been one of the key factors underpinning the greenback. 

Adding to this, positive trading sentiment across European equity markets, pointing to improving risk sentiment, dented demand for traditional safe-haven assets and did little to assist the precious metal to move back above the key $1200 psychological mark.

Meanwhile, firming expectations for an eventual Fed rate hike move at its September meeting and increasing prospects for one more hike in December, on the back of positive incoming US economic data, might further collaborate towards cap any meaningful up-move for the non-yielding yellow metal. 

Moving ahead today's release of the US PPI print will now be looked upon for some short-term trading impetus ahead of this week's other important macro releases/key events - including the latest consumer inflation figures and monthly retail sales data from the US, along with the ECB and BoE monetary policy updates on Thursday.

Technical levels to watch

The $1200 round figure mark might continue to act as an immediate hurdle, above which the positive momentum could get extended towards $1206-07 supply zone. On the flip side, weakness back below $1193-92 zone might now turn the commodity vulnerable to slide further towards $1185 strong horizontal support.

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