The XAU/USD pair had a slightly positive session but as we can see uncertainty over when the Federal Reserve would start winding down its $85 billion monthly bond purchases continues to affect the market sentiment. In the latest economic data, Markit's flash manufacturing PMI came in at 54.4, down from the previous month's 54.7 and below expectations for a reading of 54.9.
According to figures from the Federal Reserve, industrial output jumped 1.1% and manufacturing activity in the New York region climbed to 1.1 from -2.2 a month earlier. The recent price action indicates that gold market participants are in a cautious mode ahead of the Federal Reserve's two-day policy meeting which begins today. Although, some investors think that the healthy U.S. employment data and budget deal out of Washington might convince FOMC members to make a move, others think that a few strong jobs numbers don’t confirm a trend and policy makers aren’t in a big rush to do anything drastic at the end of the year. Until the announcement, gold prices will probably continue to remain between the 1252 and 1225 levels. Since the bearish side of the boat is so overcrowded, I would like to wait and see the market's reaction.
Looking at the weekly and daily charts from a purely technical point of view, I think the general outlook will remain bearish as long as the XAU/USD pair trades below the Ichimoku clouds and within the descending channel. However, as I mentioned in my previous analysis, if the Fed holds its fire this week and awaits more data, the XAU/USD pair could climb as high as 1293. On its way up, resistance can be found at 1252, 1268 and 1282. A close below the 1225 support level could take us back to the 1213 support level. I think breaching this level would accelerate downward movement. If that happens then the next possible targets will be 1200 and 1180.