Gold prices ended yesterday's session with a loss as rising expectations that the Fed's quantitative easing program will be scaled back in the near term continued to weigh on the market. Last week, Federal Reserve Chairman Ben Bernanke said that tapering of the $85billion monthly pace of asset purchases would begin later this year if the economy gets on a path of sustainable growth and the unemployment rate falls below 7%. The U.S. Central Bank also adjusted its 2014 forecast for the unemployment rate from a range of 6.7-7% to 6.5-6.8%. Although the Federal Reserve has been too optimistic about the economy in the past, the fact that it will begin curbing stimulus sooner rather than later lures investors away from the precious metal. Data released from the Commodity Futures Trading Commission shows that speculative investors reduced their net-long position in gold to 43692 contracts, from 59005 a week earlier. It seems that the safe haven has definitely lost its gleam after the last week's sell-off. Pattern on the daily and 4-hour chart suggests that gold prices might be range-bound (possibly between 1320 and 1266) in the near term.
If the 1266 level holds, we might form a bottom here. If that is the case, I would expect a pull back towards the upper band of the descending channel which we can see on the daily chart. To the upside, the bulls will need to break through the 1300 resistance level in order to gain more traction to tackle the 1320 and 1332.17 levels. If the bears increase the selling pressure and prices start to fall, there will be support at 1276 and 1266. A sustained break below 1266 would indicate that the next stop is the 1240 level.
