Gold prices ended the week higher and settled at $1335.95 an ounce on Friday. It appears that the XAU/USD pair found some support after four consecutive weeks of losses but remaining within the previous week's trading range indicates that neither the bulls nor the bears were able to send the price beyond the range of the previous week. However, this Harami (inside week) tells us that the selling pressure has weakened, at least for now.
Friday's data from the Commodity Futures Trading Commission (CFTC) showed that speculative traders on the Chicago Mercantile Exchange increased their net-long positions in gold (the first rise in four weeks) to 67139 contracts, from 58796 a week earlier. Of course, this reaction is not surprising since concerns about the U.S. budget talks and Fed's decision to postpone tapering asset purchases at its last meeting put pressure on the American dollar and boosted demand for safe-haven diversification.
On Friday, Federal Reserve Bank of Chicago President Charles Evans “I can’t have tremendous confidence in our economic situation. A lot of developments are still under way. At the moment, the data doesn’t provide us with confidence to make major adjustments”. I think the speculative demand for the precious metal will increase if Democrat and Republican lawmakers don't act immediately to raise the debt ceiling and avert a government shutdown.
From a technical point of view, the 1345 level will be the first strategic point for the bulls to conquer because that would push prices above the Ichimoku clouds on both of the daily and 4-hour charts. A daily close above this level would suggest that the momentum is once again turning bullish. If the bulls manage to clear this resistance, then the next possible targets will be 1360, 1374 and 1380.
To the downside, expect to see some support between 1333 and 1318. Closing below the 1318 support level may give the bears the extra power they need to revisit the 1300-1305 zone.
