Gold slumps to $1220 area as US Dollar continues to gather strength

• Risk-on mood weighs on the precious metal on Monday.
• Chicago Fed's National Activity Index falls short of expectations.
• US Dollar ındex marches higher toward 96.

After failing to break above $1230 earlier in the day, the XAU/USD pair came under pressure and started to retrace last week's gains. As of writing, the pair was trading at $1221, losing 0.42% on a daily basis.

A broad-based USD strength and an improved sentiment seem to be the primary catalysts of the pair's price action on Monday. The selling pressure witnessed on European currencies amid the ongoing political concerns in Italy and the UK provided a boost to the buck. The US Dollar Index, which finished the previous week with modest gains above the 95 mark, extended its march north today and recently reached a session top of 95.99. At the moment, the index is up 0.33% on the day at 95.95. Today's data from the U.S. showed that the Chicago Fed's National Activity Index eased to 0.17 in September from 0.27 in August, but was largely ignored by the participants.

Meanwhile, major equity indexes in the U.S. started the day higher to reflect an improved market sentiment that makes it difficult for traditional safe-havens such as the precious metal find demand. At the moment, the Dow Jones Industrial Average and the S&P 500 indexes were both up around 0.25% on the day.

There won't be any other macroeconomic data releases in the remainder of the day and the markets' risk perception is likely to continue to drive the pair.

Technical levels to consider

The initial support for the pair could be seen at $1218 (Oct. 18 low) ahead of $1205 (50-DMA) and $1200 (psychological level). On the upside, resistances are located at $1230 (daily high), $1234 (Oct. 15 high) and $1244 (Jul. 17 high).