Although XAU/USD tried to climb yesterday, the pair ran out of gas and fell back to Friday’s settlement price during the Asian session today. Weak growth in the United States and Europe damped demand for gold. Lately, there has been a constant downward pressure on the shiny metal as investors became more anxious. On the 4 hour time frame, prices are below the Ichimoku cloud and we have a bearish Tenkan-sen (nine-period moving average, red line) - Kijun-sen (twenty six-day moving average, green line) cross.
This formation does not look good the bulls in the near term. 1 hour and 30 minute charts also supports the bearish sentiment. Because of this, I think today the pair will test the last week’s low of 1705.87 and probably drop further. On the daily chart, XAU/USD has been trapped between the first line of the cloud (known as Senkou Span A) and the second line of the cloud (known as Senkou Span B) since October 24 and the recent price action suggests that we are going to head towards the 1700 level if 1705.87 gives way.
The 1700 level may offer some support as it converges with the weekly support. A daily close below 1700 would shift things to the bears and increase speculative selling pressure. If the bulls regain some strength and the pair reverses, expect to see more resistance at 1717.26, 1724 and 1730.03.