After three consecutive days of gain, the XAU/USD pair closed yesterday’s session lower than opening. The pair initially fell to its lowest level in five days but weaker-than-expected consumer spending data helped gold to recover some of its losses quickly and close at $1316.37 an ounce. Worries over escalating conflict in Iraq, signs of a pickup in inflation and expectations the U.S. equities will take a breather from their recent advances have been driving this market’s bullish activity.
Candlesticks show that the bulls are persistent about buying on dips and protecting the 1306 floor. However, they have been struggling to pass through the 1328 resistance level. Each time the market makes an attempt to reach there, the bears come in and step up the pressure. The XAU/USD pair has been range bound (as expected) since we entered the Ichimoku cloud on the daily time frame and as you can see almost each candle has a long wick at one end. This indicates uncertainty and as a result this pair can only be scalped in this zone in the near term.
Breaking through the resistance around 1328/31 will probably lure more buyers in and then we could see a test of the 1334 level. Once above that, the bulls will be aiming for 1340 next. On the other hand, a daily close below the 1306 support level would shift momentum to the bears’ favor and clear the path to 1300 - 1297. If gold prices breach this support, we might see 1292 printing on our charts soon after.