Gold Gets Support From Flight To Safety - 2 October 2014

The XAU/USD (Gold vs. the American dollar) settled slightly higher on Wednesday, marking the first rise in three trading sessions, as heightened risk aversion drove up buying of safe-haven gold and the yen. Global stock markets fell yesterday, weighed by downbeat economic data and growing unrest in Hong Kong. Data released from the Institute for Supply Management showed that the index of national manufacturing activity fell to 56.6 from 59.0 a month earlier, while the ADP Research Institute reported that private sector added 213000 jobs in September.

For quite some time, gold has maintained an inverse relationship with stocks so the Japanese and U.S. equity markets will be on my radar. If increasing volatility becomes a major problem, the market sentiment can change temporarily. The market will have plenty of economic data to digest, but of course the U.S. Labor Department's jobs report (tomorrow) and ECB policy announcement (today) will draw more attention as usual.

XAUUSD Week 10214

So far, the bulls have managed to hold the XAU/USD pair above the vital 1200 level and because of that I think we will see some profit taking. If that is the case, expect a rebound towards the 1225 level where the top of the Ichimoku cloud resides on the 4-hour time frame. This will be the key level for the bulls to pass in order to challenge the bears on the next battle field at 1235/40. On the other hand, a sustained break below 1200 would place control back in the paws of the bears as we head towards the 1180/2 support level. On its way down, support may be found at 1194/3.

XAUUSD H4 10214

Alp Kocak
Alp Kocak has been trading Forex since 2003. He writes technical analysis based on Japanese candlesticks and Ichimoku Kinko Hyo.