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Gold prices trade on a front foot around $1260 levels as treasury yields extended overnight losses on the back of an all out dovish Fed.

The 2-yr treasury yield, which mimics short-term rate hike bets, dropped 4 basis points in Asia to 0.84%. The yield was trading at 0.98% ahead of the FOMC statement release.

Meanwhile, volatility in the major Asian equity indices is keeping the metal bid as well. Prices currently trade around $1260; up more than 2% since FOMC rate decision.

The immediate hurdle is seen 1263 (monthly 100-MA). A violation there would expose 1283 (Mar 11 high). On the other hand, immediate support is seen at 1227 (23.6% of Dec low-Mar high), under which prices could test bid around 1200 levels.

"The market jumped after the Fed meeting but there are a lot of people on the long side, so some sort of profit-taking is happening today," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

"We will see how the market reacts in the overnight session. The upside seems to be capped at $1,280 and downside limited at $1,225."

Gold price bounced back up above $1250 and US dollar dropped over 1% against G10 currencies after the Fed meeting. Apart from a dovish growth outlook, the Committee also lowered its median projection of interest rate at the end of 2016 to the equivalent of two quarter-point increases, from four increases projected in December. The prospects of “lower for longer” interest rate trajectory likely revives interest in gold.