Gold weakens back to yesterday's over 2-week lows

   •  USD regains traction and prompts some fresh selling.
   •  Improving risk appetite adds to the downward pressure.
   •  Fed rate hike expectations did little to lend any support.

Gold continued losing ground through the mid-European session and dropped back closer to over 2-week lows, touched in the previous session.

The latest leg of a sharp fall over the past few hours could be attributed to resurgent US Dollar demand, which tends to dent demand for dollar-denominated commodities - like gold.

Adding to this, fading safe-haven demand, amid some signs of stability in the global financial markets, further weighed on the precious metal's safe-haven appeal and collaborated to the downfall.

Meanwhile, speculations over a hawkish outlook for the rest of the year, further reinforced by a fresh wave of an upsurge in the US Treasury bond yields, further drove flows away from the non-yielding metal and did little to lend any support.

It would now be interesting to see if the commodity continues to find some buying interest ahead of the very important 200-day SMA support or bears maintain their dominant positions as investors start repositioning for the latest FOMC monetary policy update, due to be announced on Wednesday.

Technical levels to watch

Any subsequent weakness is likely to find some support near the $1307-05 region (200-DMA), below which the downfall could get extended even below the $1300 handle towards its next support near the $1293 region.

On the upside, $1316 level now seems to act as an immediate resistance, which if cleared might trigger a short-covering bounce towards $1321 level en-route $1326 supply zone.