Gold corrects to $1290 but downside seems limited ahead of key event risks

Gold edged lower on Wednesday and eroded part of previous session's strong gains closer to the key $1300 psychological mark.

Overnight spot prices rose to fresh multi-month highs as investors leaped on to traditional safe-haven assets ahead of this week's key event risks on Thursday - the UK general election and former FBI Director James Comey’s testimony. Moreover, political tension in the Middle East also underpinned safe-haven demand and lifted the precious metal to $1296 level. 

Adding to this, broad based US Dollar weakness, backed by tumbling US treasury bond yields on fading expectation for additional Fed rate-hike moves through 2017, provided an additional boost to dollar-denominated / non-yielding yellow metal.

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A modest recovery in the bond yields, underpinning the greenback demand, coupled with slight improvement in investors' risk-appetite has been the only factor weighing on the commodity since Asian session on Wednesday.

Any further downslide, however, is likely to remain limited amid a flurry of event risks on Thursday, which might trigger a fresh bout of volatility across global financial markets and drive investors back towards traditional safe-haven assets. 

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Technical levels to watch

Immediate support is pegged near $1288 level, which if broken could drag the metal back towards $1280 support before eventually heading towards its next important support around $1270-69 area. 

On the upside, bulls would be eyeing for a sustained momentum beyond $1293-94 region, above which the commodity seems all set to surpass the $1300 handle and aim towards testing $1307-08 resistance zone.