Gold prices continued to fall yesterday, extending losses to third straight session, as a stronger dollar reduced the appeal of the precious metal as an alternative investment. Although the XAU/USD pair bounced up quite nicely from the top of the Ichimoku cloud on the 4-hour time frame, the bulls failed the overcome the resistance in the 1246/3 region. As a result, prices dropped with momentum all the way back to the 1223.80 level where the top of the daily cloud and short-term bullish trend line intersect.
It appears that the market is trying to form a base for a recovery. As I mentioned in my previous analysis, this area (between the 1227.50 and 1222 levels) is a strategic camp for the bulls to defend. If they can push and hold prices above 1227.50, they may have an opportunity to test the 1238.67-1236.37 area. Beyond that, the 1246/3 zone stands out as obvious resistance. Penetrating this significant barrier could provide the bulls extra fuel they need to reach the next destination, the 1263.50-1258.60 area.
On the other hand, if the bears win the battle and drag prices below the 1222 level, buyers may have to wait a little longer as the market will be aiming for 1215/3. A break down below 1215/3 would make me think that XAU/USD will pay a visit to the anticipated support zone that stretches from 1208 to 1205.
