Gold prices extended their losses on Wednesday as the dollar strengthened and signs of stabilization in the risk environment dulled the metal’s safe-haven appeal. The XAU/USD pair traded as low as $1117.60 an ounce after the Commerce Department reported durable goods orders jumped 2.2% in July, exceeding consensus estimates. Equities markets shook off early weakness and recovered as China's policy easing steps eased fears of a deep global disaster.
Still, some people remain on edge as worries linger on whether Beijing's moves would be enough to halt the collapse in its stock markets. Attention now turns to the second estimate of second-quarter U.S. gross domestic product figures due later today. The recent batch of encouraging economic data underpins the bearish view for gold but the Fed might delay raising interest rates given the recent market turmoil.
The XAU/USD pair seems to be holding above the 1125.50 support but there are some tough barriers ahead. From a technical point of view, both the daily and 4-hour charts are giving mixed signals at the moment. On the daily time frame, the XAU/USD pair is moving below the clouds but the Tenkan-sen (nine-period moving average, red line) and the Kijun-sen (twenty six-period moving average, green line) are positively aligned. On the 4-hour chart, we have a bearish Tenkan-sen - Kijun-sen cross but the market is supported by the cloud. With that in mind, I think the bulls will need to pass through 1132/0 area so that they can have a chance to challenge the bears at 1138. Breaching this barrier is essential for a bullish continuation towards 1147. To the downside, the initial support stands at 1120, followed by 1116. If the support at 1116 is broken, then it is likely that XAU/USD will test the 1109.70.
