Gold surrenders majority of early gains, Fed policy statement holds the key

Gold surrendered majority of its early recovery gains to $1316 and has now moved on the verge of breaking into negative territory.

The precious metal got an early boost from riving safe-haven demand after the US President Donald Trump threatened to "totally destroy" North Korea. Also collaborating to the early up-move was prevalent weaker sentiment surrounding the US Dollar, and sliding US Treasury bond yields, which tends to benefit dollar-denominated commodities - like gold.

The up-move, however, lacked any strong follow through momentum amid growing conviction that the Fed would eventually start unwinding its massive $4.5 trillion balance sheet. This coupled with expectations of additional Fed rate hike action by the end of this year further collaborated towards keeping a lid on any sharp up-move for the non-yielding commodity.

Hence, focus would remain on the accompanying rate statement, updated economic projections and the Fed Chair's Janet Yellen's post-meeting press conference, where any hawkish signals would pave way for extension of the metal's near-term corrective slide from yearly tops, touched earlier this month.

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Technical levels to watch

A follow through retracement below $1310 level is likely to accelerate the fall back towards $1305-04 intermediate support before the metal eventually drops to sub-$1300 level.

On the upside, momentum beyond $1316 area (session top) could get extended towards $1320 level, above which the commodity is likely to dart towards $1330 horizontal resistance.