Gold recovers back above $1270, but lacks follow through traction

   •  Falling US bond yields/safe-haven demand help reverse early downtick. 
   •  Fed rate hike expectations should cap any meaningful recovery. 

After an initial downtick to $1266 area, gold gained some positive traction and jumped to fresh session tops during the early European session.

With markets looking past Friday's upbeat US ISM non-manufacturing PMI, which helped offset smaller-than-expected rebound in the headline NFP print, a sharp retracement in the US Treasury bond yields benefitted the non-yielding precious metal. 

   •  US Dollar treading water below 95.00

Adding to this, the prevalent cautious sentiment around European equity markets was also seen boosting demand for traditional safe-haven assets and further collaborated to the yellow metal's up-move to $1271 level. 

It, however, remains to be seen if the commodity is able to build on the tepid recovery move or meets with some fresh supply at higher levels amid growing market conviction that the Fed would stick to its gradual monetary policy tightening cycle and deliver a third rate hike in December. 

Technical levels to watch

Immediate resistance is pegged at 100-day SMA, near the $1276 region, above which a bout of short-covering could lift the metal back towards $1282-83 supply zone. On the downside, weakness below $1266 level is likely to get extended towards the very important 200-day SMA support, near the $1261-60 region, which if broken would open room for an additional near-term depreciating move for the commodity.