Gold erases daily gains as USD regains traction

Extending its retracement from three-day tops around $1221 area, Gold erased all of its daily gains and has now dipped into negative territory to currently trade around $1214 level. 

Earlier on Tuesday, spot prices extended recovery move and move farther from 5-1/2 month lows touched last week. However, the prevalent risk-on mood, as depicted by upbeat sentiment surrounding equity market, drove flows away from traditional safe-haven assets and failed to assist the metal to build on Monday's recovery move. 

Moreover, the greenback also regained traction, with the overall US Dollar Index reversing early losses to move back to 101.00 (within striking distance of last week's 13-year high), and is further weighing on dollar-denominated commodities - like gold. The greenback has been scaling higher on growing prospects of aggressive fiscal spending by Trump administration and December Fed rate-hike expectations. Maintaining its high degree of negative correlation, the precious metal reversed sharply and lost over 10% from nearly 1-1/2 month high touched following Donald Trump's victory in the US presidential election.

Today's US economic docket, featuring the release of existing home sales and Richmond manufacturing index might provide some short-term trading opportunities. However, the broader trend would remain dependent on USD price dynamics, which is expected gain fresh impetus from Wednesday's FOMC meeting minutes. 

Technical outlook

Carol Harmer, Founder at charmertradingacademy.com, notes, "resistance is at 1235 so we need to clear this before we see rallies...we know the $ is strong...we are looking for a correction and this 1235 will determine whether we trade higher or go down and take out the 1199 lows..."

She further adds,  "Gold had not finished with the downside....Now if we break above 1235 we can correct further with the break point of 1255 looking to entice...I personally feel Gold will run out of steam in this 1255/60 area so we wold liquidate any longs and re-sell...keeping stops then above 1275.."

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