Gold drops below $1260 as US T-bond yields push higher

• Safe-havens suffer losses in the NA session.
• 10-year US T-bond yield is up nearly 3%.
• DXY stays flat above 93 ahead of tax bill vote.

After refreshing its highest level since December 6 at $1265, the XAU/USD pair reversed course and fell into the negative territory in the NA session. As of writing, the pair was trading at $1259.50, down 0.2% on the day. 

T-bond yields drive the price action

Although major equity indexes in the U.S. have lost their footings during the first half of the session after starting the day flat, traditional safe-havens such as gold and T-bonds continue to have a difficult time finding demand. As of writing, the yield on the 10-year T-bond is up 2.9% at its highest level since October 27 at 2.461%.

Meanwhile, today's data from the U.S. showed that the current account deficit shrank to $100.6 billion in the third quarter from $124.4 billion, beating the market estimate of $116.8 billion. Furthermore, housing starts in November increased by 3.3% while building permits contracted by 1.4%, both readings coming in better than experts' expectations.

Later in the day, investors will be closely watching the tax bill vote. "Republican Senator Collins of Maine has voiced support for the tax reform bill.  This all but clinches passage when both houses of Congress vote on it this week.  The House is expected to vote today and the Senate tomorrow.  Press reports suggest that the Democrats have been searching for specific provisions that can be challenged, yet this seems like only delaying tactic," BBH analysts noted in a recent report.

Technical levels to consider

The pair could extend its gains if it makes a daily close above $1272 (200-DMA), and aim for $1277 and $1289 (Dec. 1 high). On the downside, supports are located at $1252 (Monday's low), $1240 (Dec. 11 low) and $1236 (Dec. 12 low). Although the CCI indicator on the daily graph remains above the 0 mark, the RSI indicator on the same graph failed to rise above the 50 mark, suggesting that the bullish momentum is fading away.