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Gold drops to fresh session lows

29 April 2019

Fails to capitalize on last week’s goodish bounce, despite a subdued USD demand. A goodish bounce in US bond yields/risk-on mood prompts some fresh selling. Traders eye US core PCE price index for some short-term impetus ahead of the Fed.

Gold met with some fresh supply at the start of a new trading week and eroded a major part of Friday's goodish up-move to 1-1/2 week tops. 

The US GDP report released on Friday showed that the US economy is estimated to have expanded at 3.2% annualized pace during the first quarter of 2019, though weaker details exerted some downward pressure US Dollar and extended some support to the dollar-denominated commodity.

This coupled with softer inflation data further reinforced market expectations that the Fed will stick to its cautious stance and was evident from a sharp intraday slide in the US Treasury bond yields, which provided an additional boost and lifted the non-yielding yellow metal closer to $1290 level.

The USD remained on the defensive through the early European session on Monday, albeit a goodish bounce in the US bond yields and the prevalent risk-on mood, amid growing optimism over a possible US-China trade deal dented the precious metal's relative safe-haven status and seemed to prompt some fresh selling.

Moving ahead, today's important release of the core PCE price index - the Fed's favoured inflation measure, will now be looked upon for some short-term trading impetus but the key focus will be on the latest FOMC monetary policy update on Wednesday and Friday's closely watched US monthly jobs report (Fed).

Any subsequent slide below the $1280 level now seems to find some support near the $1274 horizontal zone, below which the commodity is likely to head back towards challenging multi-month lows support near the $1267-66 region. On the flip side, the $1285 level now seems to act as an immediate hurdle, which if cleared might assist the metal to aim back towards reclaiming the key $1300 psychological mark.

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