Gold lost ground against the American dollar for a fourth consecutive session on Wednesday after the minutes from the Federal Open Market Committee's July policy meeting showed that officials are willing to tighten policy in response to the economic data. According to the records, "Many participants noted that if convergence toward the committee’s objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated". However, they also noted that they needed further evidence before concluding that was the right approach.
Although there was no discussion on the timing of a rate increase in the minutes, general tone was more hawkish than investors expected and that dragged the XAU/USD pair below the $1292 support level. As a result the pair traded as low as $1287.80, the lowest level in two weeks. As we often say, its not the news, but the market reaction to news that matters. Yesterday's candle -which closed below the Ichimoku cloud on the daily chart- now supports the bearish outlook on the 4-hour chart. In other words, there will be more strength behind the bears than the bulls unless the market climbs back above the clouds.
In the meantime, the key levels to watch will be 1287/6 and 1297. The bulls will need break the interim resistance located at 1292 in order to challenge the bulls at 1297. Beyond that, expect to see resistance at the 1303 level. If the bears successfully push the market below the 1287/6 area, the XAU/USD pair might visit the 1280 support level. Closing below 1277 would indicate that the bears will be targeting the 1268 level next.
