Gold extends recovery from 5-week lows, jumps closer to weekly tops

Gold built on previous session's recovery move from 5-week lows and jumped back above $1250 level, closer to weekly highs.

The ongoing slump in oil prices pushed down the US equity markets and was seen extending support to the precious metal's safe-haven appeal. 

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Moreover, continuous slide in oil prices also fueled concerns over slowing inflationary pressure, which now seems to have raised doubts over the prospects for a third Fed rate hike this year. The same is evident from flattening of the US Treasury yield curve, which is eventually benefitting the non-yielding metal. 

Adding to this, a softer tone around the greenback, with the key US Dollar Index easing from one-month highs, provided an additional boost to the yellow metal's strong recovery move back closer to weekly tops near $1255 region. 

Later during the NA session, the release of usual weekly jobless claims from the US would influence sentiment surrounding the greenback and provide some trading impetus for the dollar-denominated commodity.

Technical levels to watch

A strong follow through buying interest should continue to boost the metal towards $1260 resistance area, above which a fresh bout of short-covering has the potential to lift it further towards $1266-67 horizontal resistance. 

On the flip side, retracement back below $1250 level now seems to find support near $1246 level, which if broken would expose the very important 200-day SMA support near $1237 region.