Gold corrects after recent rally to 3-week highs, dips below $1240

Gold took a breather after its recent upsurge and traded with minor losses on Wednesday, snapping three consecutive days of winning streak to near three week tops. 

A modest US Dollar demand from multi-month lows was seen weighing on the dollar-denominated commodities - like gold. This coupled with a pickup in the US Treasury bond yields further dented demand for the non-yielding precious metal. 

Moreover, a slight improvement in investors' appetite for riskier assets, as depicted by positive trading sentiment around European equity markets, did little to extend any support to traditional safe-haven assets and dragged the yellow metal to session lows near $1237 region. 

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Further downside, however, is likely to be limited amid fresh political jitters coming out of the world's largest economy and hence, any retracement back towards the very important 200-day SMA would now be looked upon as buying opportunity. 

Technical levels to watch

Immediate support is pegged near $1235 level, below which the metal is likely to aim towards testing the 200-day SMA support near $1230 region. On the flip side, momentum above $1241-42 area now seems to confront resistance at 100-day SMA near $1247 region, above which a fresh bout of short-covering has the potential to continue boosting the commodity back towards $1257-58 strong horizontal hurdle.