Gold surrenders early gains to near two-week tops

   •  Weighed down by a sharp uptick in the US bond yields.
   •  Downside seems limited amid persistent USD weakness. 

Gold surrendered its early modest gains to near two-week highs and has now drifted back into negative territory during the early NA session. 

A sharp recovery in the US Treasury bond yields following hawkish comments by Dallas Fed president Robert Kaplan, signaling three rate hikes in 2018, has been one of the factors prompting some fresh selling around the non-yielding commodity. 

Currently trading around the $1261 region, the precious metal is now headed to the lower end of its daily trading range amid fading safe-haven demand, despite the prevalent cautious trading sentiment around equity markets. 

Meanwhile, possibilities of some technical selling, just ahead of the very important 200-day SMA and especially after the recent upsurge of around 2.5% from last Tuesday's near 5-month lows, might have also collaborated to the commodity's slide over the past hour or so. 

Further downside, however, remained cushioned by persistent US Dollar weakness, which tends to underpin demand for dollar-denominated commodities - like gold.

Technical levels to watch

A follow-through retracement below $1260 level is likely to get extended towards $1255 horizontal level before the metal eventually drops to $1252-51 support.

On the upside, momentum beyond $1265 level (session tops) might get extended towards 200-day SMA hurdle near the $1268 region, above which a fresh bout of short-covering could lift the commodity towards $1276 supply zone.