By: DailyForex.com

The XAU/USD pair ended yesterday’s session higher, supported by strong Chinese manufacturing PMI data and geopolitical issues. The data out of China, which surpassed India as the biggest gold consumer last year, showed that preliminary index of manufacturing activity rose to 50.8 from 49.4 in May. U.S. housing data was above expectations but failed to have a lasting impact on the greenback.

It looks like the market is digesting last week’s gains while keeping an eye on the situation in Iraq. Gold has support from geopolitical issues but appetite for more conventional assets such as stocks could limit gold’s potential upside. Moving inside the Ichimoku clouds on the weekly time frame is another element which makes me not to expect a stellar performance from the shiny metal. Technically, the thickness of the Ichimoku cloud is important because the thicker the cloud, the less likely it is that prices will manage a sustained break through it. The thinner the Ichimoku cloud, a break through has a better chance.

XAUUSD Daily 62414

On the 4-hour chart, the market is trading above the Ichimoku clouds and that indicates there is more volume and strength behind the bulls at the moment. The first hurdle gold needs to jump is located around the 1324 level. However, there is significant resistance between 1328 and 1331. Therefore, only a sustained break above the cloud (daily chart) could extend the bullish movement towards 1351.50. If the bulls run out of gas and the market drops below the 1306 support level, I will look for 1300 - 1297. Breaking this support would suggest that the 1286 level will be the next stop.

XAUUSD Weekly 62414

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