Gold erases majority of its early gains to $1283 supply zone

   •  Gold fails to clear $1283 supply zone. 
   •  Weighed down by renewed USD demand. 
   •  Sliding US bond yield likely to limit sharp downslide. 

Gold once again met with some fresh supply near the $1283 supply zone and trimmed majority of its early gains closer to weekly tops. 

The precious metal's initial up-move was being capped by a modest pickup in the greenback demand. In fact, the key US Dollar Index has managed to recover early losses and was seen weighing on dollar-denominated commodities - like gold.

Adding to this, buoyant trading sentiment around European equity markets, which tends to dent demand for traditional safe-haven assets, also did little to provide any boost to the yellow metal's recovery move from near three-week lows touched on Wednesday.

However, sliding US Treasury bond yields might now contribute towards limiting any sharp downslide for the non-yielding commodity, at least for the time being.

Next on tap would be the US economic docket, which would be looked upon for some short-term trading opportunities. Also in focus would be the ECB decision, which is expected to infuse some volatility in the FX market and might influence the metal's safe-haven demand. 

Technical levels to watch

A follow-through retracement below 100-day SMA, near the $1276-75 region, could get extended towards $1271 level en-route $1267-66 support. On the upside, $1283-84 area remains immediate strong supply zone, above which a bout of short-covering could lift the metal towards $1289-90 hurdle ahead of $1296 level.