Gold gapped down on Monday, but with the Dollar vulnerable to further losses, the yellow metal will likely remain supported in the long-term.

Gold lost some of its sparkle on Monday, having hit its highest level in over a year in the previous session, as risk appetite flickered back to life.

The market players who were bracing for North Korea to conduct another missile launch over the weekend to mark their foundation day, were relieved when Pyongyang decided to host a celebration instead. This reprieve has rekindled appetite for riskier assets, and supported the Greenback while punishing safehavens such as Gold. While the yellow metal may continue to edge lower amid the risk-on trading environment, the lingering air of caution is likely to limit downside losses.

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The Dollar is still vulnerable to further losses, as expectations rapidly fade over the Federal Reserve raising US interest rates in December, so Gold is likely to remain supported moving forward. Further upside is still on the cards, especially when considering how heightened political uncertainty in Washington, geopolitical tensions and Brexit concerns continue to stimulate the flight to safety.

From a technical standpoint, Gold bulls are still in the game, despite the nasty drop from over the weekend. A breakout above $1340 should encourage a further appreciation higher towards $1350. In an alternative scenario, a breakdown and repeated weakness under $1325 is likely to encourage a decline towards $1315 and $1300, respectively.

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