Gold placed at six week tops above $1280 level, downside seems limited

Gold continued gaining traction through early European session and is currently placed near six week tops around $1281 level.

Geopolitical tension in the Middle East, after Saudi Arabia, Egypt, UAE and Bahrain snapped diplomatic and commercial ties with Qatar over terrorism support charges, and a weekend terrorist attack in London boosted the precious metal's safe-haven appeal.

   •  Saudi Arabia cuts ties with Qatar for "protection of national security"- RTRS

Adding to this, fading expectations for a faster Fed rate-tightening cycle through 2017 provided an additional lift to the non-yielding metal and helped build on Friday's strong up-surge led by dismal May jobs report.

However, a modest recovery in the US treasury bond yields, always backed by an eventual June rate-hike action, extended some support to the US Dollar and seems to be the only factor keeping a lid on dollar-denominated commodities - like gold.

Meanwhile, political uncertainty ahead of the upcoming UK general election this week might continue to limit any sharp downslide, at least for the time being, as investors are more likely to buy the dips as a hedge against any unexpected outcome.

   •  UK: Polls getting tighter – Deutsche Bank

Technical levels to watch

From current levels, $1284-85 region is likely to act as immediate resistance,  above which the commodity seems all set to head towards testing April monthly highs resistance near $1295 region before aiming to reclaim the $1300 handle.

On the flip side, retracement back below $1275-74 area now seems to find strong support around $1269 region and any further weakness below this support is likely to be limited by a strong support near $1262-61 region.