The XAU/USD pair (Gold vs. the American Dollar) closed lower than opening for a second consecutive day as gains in U.S. equities helped draw investors away from the precious metal.
Despite the geopolitical risks, stocks have been gaining on news of a strengthening recovery and encouraging corporate results. As I pointed out earlier, the resilient U.S. equities mean a big headwind for the shiny metal. It looks like tensions in the Middle East and Ukraine provide temporary boost only.
Recent statistics show that Chinese gold consumption weakened in the first half of 2014. China had surpassed India as the biggest gold consumer last year. In the meantime, India has no intention of easing the restrictions on gold import. Lackluster physical demand for gold might continue to weigh on the market unless we see signs of destabilization in the risk environment.
The XAU/USD pair is testing the 1303/1 support area during the Asian session, by the time I prepare this analysis. If the bears capture this fort, the next support to watch will be around the 1297 level. I think breaking 1297 is essential for a bearish continuation. In that case, I will look for 1292. A daily close below this level means the 1286 level where the top of the Ichimoku cloud currently reside on the daily time frame could be the next stop. The bulls will have to push prices above the 1312 resistance level in order to gain some strength and challenge the bears at 1318.40. Only a sustained break above 1318.40 would make me think that the market is ready to tackle the resistance at 1324.50.
