Gold prices fell $4.78 on Tuesday as a rally in world stock markets today kept investors away from the safe-haven metal. Selling pressure returned to the market as expected after prices dropped through $1225. As a result, the XAU/USD pair tested the $1215 level, the confluence of a horizontal support and a medium-term bullish trend line.
This strategic area prompted some short-covering, but the bulls will have to push prices beyond 1225-1227.70, the Kijun-Sen (twenty six-period moving average, green line) on the H4 chart, so that they can find a chance to march towards the 4-hourly Ichimoku cloud. In that case, 1231 and 1235.30 will probably be the next stops. If the market passes through 1235.30, then I wouldn't rule out the possibility of a push up to the 1242 level. The daily and the 4-hourly clouds overlap (roughly) in the 1235.30-1250 area, so the first attempt to penetrate this barrier may attract sellers.
The bears have to clear nearby supports such as 1215 and 1210.70-1207 to put more pressure on the market, and until that happens, the downside potential will be limited (i.e. chasing gold lower at this point may be a bit risky). If XAU/USD dives below 1207, then the 1198/5 zone will be the next port of call.
