Gold reverses Friday’s slide to multi-month lows

After dropping to a fresh 5-1/2 month low in the previous session, Gold steadied to stage a recovery on Monday amid broad based greenback retracement.

Currently trading around $1216 level, the previous metal erased its entire slide recorded on Friday led by growing expectations for an eventual Fed rate-hike action in December, which tends to weigh on non-yielding assets. 

On Monday, the greenback, as measured by the overall US Dollar Index, witnessed a profit-taking slide from the highest level since March 2003 and is boosting demand for dollar-denominated commodities - like Gold. Meanwhile, cautious opening in European equity markets is driving the safe-haven demand and extending support to metal's ongoing recovery momentum. 

Moreover, the yellow metal has rebounded from the vicinity of a critical support near $1200 handle and hence, Monday's recovery momentum could also be attributed to short-covering following its post-US presidential election slide of around 10%. 

Pointing to the bearish sentiment surrounding the metal, Carol Harmer, Founder at charmertradingacademy.com, notes, "We are at critical levels know in Gold..and we have to hold this support to stop a further onslaught by the sellers...and frankly I don't think that will hold us for long either....The market dosnt look strong...and we are seeing no correction at all...thus making long positions look precarious..."

She further writes, "If we do lose this support and break through 1199 there really is nothing much to hold us till 1172..."

Investors' focus will remain on the Fed's next monetary policy action and this week's key attention would be on the minutes from FOMC latest monetary policy meeting, which might further reinforce market expectations that the central bank is moving closer to announcing a rate-hike at its December meeting and would eventually trigger a fresh leg of weakness in gold prices.

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