XAU/USD Update – 1/8/14

1/8/14 (11.45am) Good Morning traders. Gold ended down on the month as the initial rally faded after the bulls ran out of steam near the $1340 resistance level. It traded as high as $1344.92 on 10th July but the market entered in a downward phase afterwards. Its currently stuck to a six-week low this morning trading at $1283.70 heading for a third straight weekly loss as U.S. economic confidence offset any safe haven demand.

Despite geopolitical problems, the USD strength made gold less popular. The stock markets continued to progress on the back of optimistic corporate results and a series of economic data providing further confirmation that the US economy is progressing to improve along the lines that the Fed expects. Although there is a growing belief that the Fed will exit from policies that have been in place for years sooner than thought, the Fed reaffirmed it was in no rush to raise rates even as it upgraded its assessment of the U.S. economy and expressed some relief that inflation was moving up toward its target. Officials want to make sure that the economy is on a solid path before they even contemplate on raising interest rates.

Looking at the chart below, we can clearly see that the gold markets still have ample levels of support below though we are not necessarily willing to sell this market although we do accept that the short term moves could be bearish. XAU/USD broke the $1290 level and settled below it opening the way for more negative trading targeting support at $1266 representing a key level for the short term, as breaking it will extend gold losses to reach $1235 followed by $1200.

On the other hand, we are still looking for some type of supportive candle in order to start buying below, but at the moment we clearly do not have the signs to start going long again. Thus, the bearish bias will remain relevant in the upcoming sessions, until the price manages to breach $1290 followed by $1314.60 levels and hold above them. Expected trading range for today is between the $1266 support and $1300 resistance level. Good Luck Trading!