The XAU/USD pair continued to sink yesterday and hit its lowest level since February 11. Although data released from the Unites States were disappointing, Federal Reserve Chair Janet Yellen's comments about the central bank’s commitment to bolster the economy pushed U.S. stocks higher and gave investors few reasons to hold safe-haven investments such as gold.
During the Asian session the pair traded as low as 1277.65 after manufacturing activity data released from China provided further evidence that the world's second biggest economy is losing momentum. According to the report released by HSBC, the index of manufacturing activity slipped to 48 from 48.5.
As a result of yesterday's price action, the XAU/USD pair is now trading inside Ichimoku cloud on the daily chart and that means the pair will be range bound for some time. Therefore, chasing gold lower (before breaking below 1268 at least) could be a bit risky at this point.
From a technical perspective, I expect to see support from here until 1268. If that is the case, we might see prices bouncing towards the 1307 level, Tenkan-sen (daily chart, nine-period moving average, red line). On its way up, resistance can be found at 1289 and 1300. However, if the bears continue to dominate the market and drag the pair below the 1286 level, the next stop would be 1256.
