Gold prices fell 1.77% on Tuesday, extending their losses to a fifth straight session, as interest rates talk and a friendly risk environment provided better investment opportunities elsewhere. The XAU/USD pair had a small bounce on Monday, after finding some support at 1243, but was unable to penetrate the 1251/0 region. Eventually, sellers increased the pressure and prices broke down below the 1240 level.
Better-than-expected housing data was also behind yesterday's drop in prices. The Commerce Department data showed sales of new homes jumped 16.6% to a 619000 annualized pace, and figures for the first quarter were revised higher. XAU/USD is currently trading at $1225.35 an ounce, slightly lower than the opening price of $1226.80. As I pointed out in my weekly analysis, the 1213 level -where the bottom of the daily Ichimoku cloud sits- stands out as the first significant support so it would not be surprising to see some profit taking.
In that case, 1231 and 1234.40 could be possible targets. The bulls will have to push prices beyond 1234.40 so that they can find a chance to challenge the bears waiting in the 1243/0 area. However, if the bears are able to maintain control and shatter the support at around 1213, then we could see a drop to 1208/3. Falling through 1203 could open up the risk of a move towards the 1194 level. On its way down, support may be found at 1197.50.
