Gold reverses early dip closer to $1250 level

Gold struggled to build on Friday's sharp rebound from the very important 200-day SMA support and slipped closer to $1250 level before recovering early lost ground. 

A modest greenback recovery, with the key US Dollar Index bouncing off six-month lows, initially weighed on the dollar-denominated commodities - like gold. However, persistent geopolitical tensions, following the latest missile test by N. Korea over the weekend, helped limit further downslide. 

Meanwhile, a mildly negative trading sentiment surrounding the European equity markets further supported traditional safe-haven assets and collaborated to the precious metal's recovery back to the $1255 region. 

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It would now be interesting to see if the yellow metal is able to build on the recent gains led by escalating political uncertainty in the US or comes under some fresh selling pressure amid growing prospects for a June Fed rate-hike move, which usually dents demand for the non-yielding metal.

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Later during the day, speeches from various FOMC members might shed some fresh light on the central bank's near-term monetary policy outlook and might provide some fresh impetus for short-term traders. The Fed monetary policy meeting minutes, due for release on Wednesday, would remain a key determinant of the metal's next leg of directional move. 

Technical levels to watch

Immediate support is pegged near $1250 level, below which the commodity is likely to drift back towards 200-day SMA support near $1245 region. A follow through selling pressure has the potential to continue dragging the metal further towards its next support near $1237 area.

On the upside, $1260 level now seems to have emerged as immediate resistance, above which a bout of short-covering could lift the metal towards $1269 intermediate resistance en-route $1278-80 important hurdle.