Gold consolidates strong gains to multi-month tops

Gold now seems to have entered a bullish consolidation phase and was seen oscillating in a narrow trading range just below $1340 level.

The precious metal witnessed a bullish gap opening on Monday after North Korea’s latest and most powerful nuclear test drove investors towards traditional safe-haven assets. Spot prices spiked to its highest since September 2016 before retracing a bit, to currently stand around the $1334-35 region. 

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In absence of any fresh development, the yellow metal's minor pullback from higher levels would still be categorized as consolidation amid persistent selling bias surrounding the US Dollar. A weaker greenback tends to underpin the demand for dollar-denominated commodities - like gold.

With the US markets closed in observance of Labor day holiday, thin market liquidity conditions could aggravate the up-move, with the commodity darting extending its bullish trajectory, even beyond $1350 level, now looking a distinct possibility.

Technical levels to watch

Retracement below $1332 level could get extended towards $1325 support area, which if broken might trigger a corrective slide towards $1315-13 horizontal support. 

Meanwhile, bulls would be eyeing for a strong follow through momentum beyond $1340 level, above which the metal seems all set to aim towards testing $1350 hurdle.