Gold drops to fresh multi-day lows near $1260

Gold prolonged its corrective slide from the vicinity of $1300 psychological mark touched last week and dropped to fresh multi-day lows following the latest PPI report from the US.

The precious metal held with modest losses and dropped to $1260 region after the government report showed producer price index (PPI) remained flat during May as compared to a sharp 0.5% increase in April. Although the yearly rate ticked lower to 2.4% in May but reaffirmed persistent upward pressure on prices and reinforced market expectations that the Fed would eventually move towards raising rates this week, which eventually attracted some fresh selling pressure around the non-yielding precious metal.

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The data also provided a minor boost to the greenback, with the key US Dollar Index recovering some of its losses to move back above the 97.00 handle, and further weighed on dollar-denominated commodities and dragged the yellow metal to session lows near $1260 region.

Adding to this, the prevalent risk-on environment, as depicted by positive trading sentiment around equity markets, did little to boost demand for safe-haven assets and stall the commodity's slide to its lowest level since the beginning of this month.

With the US economic docket out of the way, broader market risk sentiment would now act as an exclusive driver of the metal's movement through NY trading session on Tuesday.

Technical levels to watch

A follow through weakness below $1259 level (monthly low) is likely to accelerate the slide towards $1255 intermediate support en-route $1250 level. On the upside, any recovery above $1262 area now seems to confront strong resistance near $1265 region, above which a fresh bout of short-covering is likely to lift the metal towards $1270 resistance.