Gold dropped as investors weighed U.S. Federal Reserve Chairman Ben Bernanke's congressional testimony warning of risks to holding interest rates too low for too long and opened the possibility of reducing bond purchases. Gold has been pressured in recent weeks by fears the Fed could scale back or halt its monthly $85 billion bond purchases that have buoyed bullion's appeal as a hedge against inflation. The physical market remained muted, awaiting fresh guidelines from the RBI after restrictions were placed on consignment imports. To curb the widening current account deficit, India banned the import of gold on payment of margin basis, following up on a 50 percent import duty hike in January. Supplies may remain tight until fresh guidelines on imports are issued by the Reserve Bank of India, probably later in the month. New York Fed President William Dudley and St. Louis Fed chief James Bullard, who will both vote at the central bank's next scheduled meeting on June 18-19, made clear further economic progress was needed before they would support curtailing bond purchases. Some officials are calling for an early end to the monetary easing given recent gains in the U.S. jobs sector. Strong demand from China, the world's second-biggest gold consumer after India, provided key support to the metal. Persistent outflows from exchange-traded funds as well as technical charts suggest gold faces more downside pressure. Now technically market is trading in the range as RSI for 18days is currently indicating 35.37, where as 50DMA is at 27515.88 and gold is trading below the same and getting support at 25684 and below could see a test of 25406 level, And resistance is now likely to be seen at 26459, a move above could see prices testing 26956.

Trading Ideas:

Gold trading range for the day is 25406-26956.

Gold ended with losses as Fed chief hints at reduced bond buying

Bernanke told Congress that the U.S. economy needs further traction before it scales back monetary stimulus.

Holdings in SPDR Gold Trust, fell 0.3 percent to 1,020.07 tonnes on Wednesday, the lowest in more than four years.