XAU/USD fell for the week but found support at the 1635.50 level. The XAU/USD pair closed higher than opening on Friday as disappointing U.S. consumer confidence data and a proposal from U.S. Speaker of the House of Representatives John Boehner to avoid the fiscal cliff failed to win support from his own party increased the precious metal’s safe-haven appeal. Consumer sentiment index fell to 72.9 from 74.5 according to the report released by University of Michigan. Despite a combination of gold supportive factors, including low interest rates and purchases by central banks, prices have been suffering due to year-end profit taking. This week sees most markets closed until Thursday for Christmas holidays therefore trading activity in the markets will be thin. The pattern on the daily time frame suggests we are going to remain in the descending channel which XAU/USD has been respecting since October.
Although XAU/USD attracted buyers at the 1635 level, I wouldn’t ignore the possibility of prices testing the 1627 support level before a retracement towards the upper band of the descending channel. Short time frame charts turned bullish on Friday but the bulls will have to break through the 1660 resistance level in order to gain some momentum. If XAU/USD breaks and holds above this level, then look for 1669.50, 1677 and 1685. Only a daily close above the 1721 level, which is the top of the Ichimoku cloud on the weekly chart, would shift things to the bulls. To the downside, there will be support at 1646, 1635.50 and 1627.
