After three consecutive days of gains, the XAU/USD pair (Gold vs. the American dollar) hit the highest level in twelve days. Yesterday the pair broke through the 1268 resistance level as disappointing U.S. economic data and escalating violence in Iraq burnished the precious metal’s safe-haven appeal. Data released from the Commerce Department showed that retail sales rose only %0.3 in May and the Labor Department reported that the number of first-time applicants for jobless benefits increased by 4K to 317K. Some investors abandoned stocks and flocked to the gold market after President Barack Obama said he won't rule out U.S. military action in Iraq against militants.
It looks like heightened risk aversion is likely to provide support to gold in the short-term but now prices are approaching to the 1277 level which could trigger some profit taking. This level had been a bottom for the market during April and May so I think it will be a tough nut to crack. Beyond this barrier, there will be significant resistance at the 1286(8) level where the descending line and 50% retracement (based on the distance between 1182.35 and 1392.04) coincide. Only a sustained break above 1288 could extend the bullish movement towards the 1297 level which happens to be the bottom of the Ichimoku cloud on the daily time frame. However, if the market encounters strong resistance around the 1277 level and prices start to fall, support can be found at 1268 and 1260/56.