Gold edges below $1320 in pre-NFP repositioning trade

Gold prices edged lower on Friday and eroded part of previous session's sharp gains, back closer to 9-1/2 month tops. 

An upbeat reading on the Chinese manufacturing sector, pointing to robust growth in the world's second largest economy, aided already buoyant market sentiment and was seen weighing on the precious metal's safe-haven appeal.

Adding to this, a modest pickup in the US Dollar demand further dented demand for dollar-denominated commodities and collaborated to the yellow metal's modest retracement.

Looking at the broader picture, the metal has settled above the key $1300 mark each of the past four trading session, supported by persistent geopolitical tensions and fading expectations of any additional Fed rate hike action by the end of this year.

With investors looking past yesterday's core PCE price index, which showed subdued inflationary pressure, today's release of the monthly US nonfarm payrolls report (NFP) would offer clues over the Fed's next move on monetary policy and eventually drive the non-yielding metal. 

   •  US: NFP likely to print 170k for August - Westpac

Heading into the key event risk, traders are likely to remain cautious as a strong headline number should boost the USD and trigger a sharp correction for the commodity.

Technical levels to watch

Immediate support is pegged near $1314 level, which if broken could drag the metal back towards $1308 ahead of the $1300 handle. On the upside, the $1323-25 region remains the immediate strong hurdle, above which the commodity is likely to dart towards Nov. 2016 swing highs resistance near $1335 area en-route $1340 level.