Gold corrects from over 2-week highs, but downside seems limited

Gold edged lower on Thursday and eroded part of yesterday's strong break-out momentum through the very important 200-day SMA hurdle.

Spot prices snapped five consecutive days of winning streak and retreated from its highest level since early May. A modest recovery in the US treasury bond yields, helping the key US Dollar Index to bounce of six-month lows, seems to be a key factor weighing on dollar-denominated commodities - like gold. 

Adding to this, initial signs of stability in global financial markets, as depicted by flat opening in the European bourses, further dented demand for traditional safe-haven assets and collaborated to the precious metal's retracement from 2-1/2 week highs. 

The pull-back, however, would still be categorized as corrective amid deepening political turmoil in the world's largest economy. Moreover, fading expectations for additional Fed rate-hike actions through 2017, against the backdrop of recent string of weaker US macro data, might also limit further downslide for the non-yielding yellow metal.

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Trader on Thursday would now look forward to the US economic docket, featuring the release of weekly jobless claims and Philly Fed Manufacturing Index, for some fresh impetus later during the NA session. In the meantime, broader market risk sentiment and the US bond yield dynamics would continue to be key determinants of the commodity's move through European session.

Technical levels to watch

A follow through retracement below session lows support near $1254 area now seems to find support near $1247-46 region (200-day SMA), below which the metal is likely to dip back towards $1241-40 important support. On the upside, bulls would be eyeing for momentum above $1260-61 immediate resistance, which if cleared has the potential to lift the metal towards $1268 horizontal resistance ahead of the next major hurdle near $1275 level.