Gold dips below $1250, FOMC in focus

Gold edged lower on Wednesday and extended previous session's retracement from near three-week tops amid increasing odds for a June Fed rate-hike action.

The precious metal failed to build on Tuesday's early up-move led and came under some fresh selling pressure in wake of a sharp US Dollar recovery. Despite of the recent disappointing US macro data, growing prospects for an eventual Fed rate-hike action at its June meeting helped the key US Dollar Index to bounce off six-month lows and was seen driving flows away from dollar-denominated commodities - like gold. 

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Investors now look forward to the release of Wednesday's release of minutes from the Federal Reserve's latest monetary policy meeting in May for clues over the timing for next Fed rate-hike action, which would eventually drive sentiment surrounding the non-yielding metal.

Adding to this, buoyant sentiment surrounding equity markets further weighed on traditional safe-haven assets and collaborated to the yellow metal's retracement back below $1250 level. 

Apart from the Fed minutes, investors would also keep a close eye on the upcoming OPEC meeting on Thursday, which could possibly limit any immediate sharp downside for the metal. Traders would prefer to buy gold as a hedge against any unexpected outcome, which could trigger a bout of volatility across global financial markets. 

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Technical levels to watch

Immediate support is pegged at the very important 200-day SMA near $1245-44 region, below which the ongoing downslide could get extended back towards $1240 support ahead of $1229-27 support area. 

On the flip side, $1255 level now becomes immediate resistance, which if cleared should lift the commodity back above $1260 level towards multi-week highs resistance near $1264-65 region.