Gold price surrenders early recovery gains, slides back closer to yearly lows

London (May 16)  Gold surrendered the majority of its early goodish recovery gains and has now retreated back closer to 4-1/2 month lows, touched in the previous session.

A fresh wave of greenback buying interest emerged since the early European session on Wednesday, lifting the key US Dollar Index to fresh YTD tops, and prompted renewed selling around dollar-denominated commodities - like gold.

Adding to this, a positive trading sentiment around European equity markets weighed on traditional safe-haven assets and further collaborated to the precious metal's retracement slide from intraday highs near the $1297 area.

Further downside, however, seems more likely to remain limited amid the ongoing retracement in the US Treasury bond yields, which tends to underpin demand for the non-yielding yellow metal.

Moving ahead, traders now look forward to the US economic docket, featuring the release of housing market data, which along with a scheduled speech by Atlanta Fed President Raphael Bostic might influence the price-action and eventually provide some trading opportunities.

Technical levels to watch

A follow-through retracement now seems to find immediate support near the $1285 level, which if broken might continue dragging the commodity further towards $1280 intermediate support en-route the $1275 region.

On the upside, the $1296-97 region, closely followed by the $1300 handle now becomes immediate strong hurdles, above which a bout of short-covering could lift the metal back towards testing $1306-07 zone (200-DMA).