Gold prices continued to decline yesterday and touched the 1320 support level as a stronger dollar reduced the appeal of the precious metal as an alternative investment. The American dollar gained some more momentum across the board after the Labor Department reported initial jobless claims increased slightly and data released from the Federal Reserve Bank of Philadelphia showed that the index measuring manufacturing activity in the region climbed to 9 in March from -6.3 in February.
Lately, easing concerns surrounding Ukraine and Russia coupled with growing perception that the Federal Reserve will increase interest rates sooner and faster than previously thought have created the exodus out of gold. Speaking strictly based on the charts, the weekly and 4-hour charts suggest that the directional bias remains weighted to the downside. Basically the overall trend is up when prices are above the cloud, down when prices are below the cloud and flat when they are in the cloud itself.
The XAU/USD pair has been making lower lows and lower highs since it printed a bearish engulfing candle on Monday, indicating that the bears are gaining strength since that the pair hit the 6-month high of 1392.04. However, it appears that the XAU/USD pair found some support just above the 1320 level. We have a bullish Tenkan-sen (nine-period moving average, red line) - Kijun-sen (twenty six-day moving average, green line) cross on the 30-minute time frame and therefore it is technically possible to see a short-term bounce targeting the 1338 - 1339 area, as long as the 1330 support level holds the market. If we break through the 1338/9 zone, the pair may extend its bullish movement and revisit the 1346 resistance level.
If the American dollar resumes its bullish sentiment and prices fall below the 1330 support level, there will be interim support at 1326.14. Below that, an important challenge will be waiting the sellers at 1320. Breaching this level would indicate that the bears will continue to dominate the market.
