Gold corrects a bit from 7-week highs, downside seems limited

Gold traded with mild negative bias on Tuesday and dropped to session lows, near $1267 level during early European session.

A modest US Dollar recovery, supported by a pickup in the US Treasury bond yields has been one of the key factors weighing on dollar-denominated commodities and contributing to the precious metal's retracement from multi-week highs. 

Looking at the broader picture, the current pull-back would still be categorized as corrective, especially after July's biggest monthly gains in previous five. Moreover, fading expectations of another Fed rate hike action in 2017 and the US political uncertainty might continue to lend support and limit any sharp profit-taking slide, at least for the time being.

Investors' focus this week would remain glued this week's key US macro data, including the keenly watched NFP data on Friday, which might influence the Federal Reserve's view on monetary policy and provide fresh impetus for the non-yielding metal. 

A slew of important US economic releases kicks off with the release of personal income and spending data for June, along with the Fed's preferred metric for inflation - Core PCE Price Index and followed by the ISM manufacturing PMI, due later during early NA session.

Technical levels to watch

Currently trading around $1267-68 region, bulls would be eyeing for a sustained move beyond $1270 level, above which the commodity seems all set to aim towards testing $1279-80 horizontal hurdle en-route $1284-85 strong barrier. 

Alternatively, sustained weakness below $1265 level could extend the corrective slide back towards the very important 200-day SMA support near $1250 region with some intermediate support near $1255-54 zone.