Gold strengthened against the American dollar for a second session on Wednesday as the conditions in the marketplace increased the shiny metal’s attractiveness as a safe-haven asset. Concerns over escalating turmoil in Iraq and a lower growth forecast from the World Bank caused major stock markets to retreat from recent highs. For quite some time, the precious metal has maintained an inverse relationship with stocks and acted as a hedge against financial or geopolitical fears. Because of that, I think the performance of the equity markets will likely continue to influence the price of gold.
Trading within the boundaries of the Ichimoku cloud on the 4-hour chart suggests there is an intense battle going on between the bears and bulls. From an intra-day perspective, I think the pair has to push its way through the 1268 resistance level -which happens to be the top of the cloud (4-hour chart)- in order to gain more traction. If the bulls manage to break and hold above that level, it is technically possible to see a bullish continuation targeting the 1277 level. Since the XAU/USD pair has paused or reversed at this same price level several times in the past, I believe that will be a very tough challenge for the bulls.
To the down side, expect to see support in the 1256/5 area where the Kijun-Sen (twenty six-day moving average, green line) currently resides. If this support gives way, we could move back to the 1249/8 area. A daily close below 1248 would shift things to the bears once again and increase speculative selling pressure.