A slight deterioration in investor risk sentiment renewed demand for traditional safe-haven assets, with Gold staging a smart recovery to nearly erase previous day losses and is currently trading around $1321 level.
Risk-aversion gripped global financial markets during early Asian session on Tuesday, with Japan's Nikkei 225 ending the day with a loss of around 1.5% while European equity markets trading mostly lower, extending support to the safe-haven appeal of the precious metal.
Ahead of the Fed meeting, the yellow metal gained some respite as the US Dollar traded broadly lower on intense selling pressure against its Japanese counterpart. However, the greenback's near-term momentum would be dependent on Wednesday's FOMC statement, which if adopts a hawkish tone is likely to weigh on the precious metal in the near-term.
From technical perspective, the metal is trading well below its short-term moving averages (10-day and 20-day SMAs) and hence, any recovery could possibly remain short-lived in the near-term.
Technical levels to watch
Bulls would be looking for a momentum above session peak level resistance near $1323 level, which if cleared seems to lift the metal towards 20-day SMA resistance near $1335-36 region. A strong buying interest above 20-day SMA resistance might now negate any near-term bearish bias and lift the commodity back towards $1350-55, support break-point now turned strong resistance.
On the flip side, reversal from current levels, and a subsequent weakness below $1315 support, now seems to turn the commodity vulnerable to drift back towards post-Brexit corrective swing lows support near $1305 ahead of the very important $1300 psychological mark. Break below $1300 handle has the potential to drag the metal towards 50-day SMA support near $1290 region.
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