Gold recovers after yesterday’s slump to near 8-week lows

Gold edged higher on Tuesday and recovered part of previous session's slump to nearly 8-week lows near $1218 level.

Overnight, the previous metal tumbled to its lowest level since May 11 after upbeat US ISM manufacturing PMI provided an additional boost to the US Treasury bond yields and drove flows away from the non-yielding commodity. Adding to this, broad based US Dollar recovery further dented demand for dollar-denominated commodities and collaborated to the yellow metal's sharp slide.

On Tuesday, renewed geopolitical jitters after N. Korea launched yet another ballistic missile, extended some support to traditional safe-haven assets and helped the metal to stage a modest recovery.

   •  North Korea says it has missile capability to hit anywhere in the world - RTRS

From a technical perspective, the commodity on Monday weekend below the very important 200-day SMA and also decisively broke through an ascending trend-line support held since the beginning of this year. Against the backdrop of a bearish technical set-up, it would now be interesting to see if the metal is able to build on the recovery move or runs through some fresh supply at higher levels. 

Technical levels to watch

From current levels, the trendline resistance near $1230-31 area, closely followed by 200-day SMA near $1234 region, seems to act as immediate resistance, above which the metal could extend the recovery move further towards $1240 horizontal resistance.

On the downside, $1220 level remains an immediate support to defend, which if broken would turn the commodity vulnerable to break below May monthly lows support near $1214 level and head towards testing the $1200 round figure mark.