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Gold corrects from one-month tops, downside seems limited

   •  Stronger USD prompts some profit-taking.
   •  Safe-haven demand to limit downside.

Gold drifted lower through the early European session on Monday and eroded part of Friday's strong up-move to one-month tops.

Currently trading around the $1290 region, testing session lows, a modest pickup in the US Dollar demand seems to have prompted some profit-taking off dollar-denominated commodities - like gold. 

However, a fresh wave of global risk aversion trade, triggered by a breakdown in German coalition talks and further reinforced by sliding US Treasury bond yields, underpinned the precious metal's safe-haven appeal. 

Adding to this, the latest US political jitter from subpoenas on Trump campaign staff and skepticism over the passage of a historic US tax cut legislation might continue to lend support and help limit deeper losses, at least for the time being. 

In absence of any major market moving economic releases, investors would keep a close eye on the US tax reform developments. Meanwhile, broader market risk sentiment and the USD price dynamics would remain key determinants of the commodity's movement at the start of a new trading week.

Technical levels to watch

A follow-through weakness could get extended towards $1285 strong horizontal support, which if broken could drag the metal back towards 100-day SMA support near the $1280 region. 

On the upside, $1294-95 zone might continue to act as an immediate hurdle, above which the commodity could aim towards surpassing the $1300 handle and test Oct. monthly high resistance near $1306 level.

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