The XAU/USD pair had a relatively tight range yesterday as investors tries to digest Friday's downswing. Demand for gold has been significantly decreasing as the conditions in the marketplace have dulled the precious metal’s safe-haven appeal. Recent data out of the United States show that the economic recovery continues to gain momentum but Europe still remains in a critical situation. Although it seems that gold prices found some support around 1608 during the Asian session, technical outlook of the market looks weak. On the daily and 4-hour time frames, prices are still below the Ichimoku clouds and we still have bearish Tenkan-sen line (nine-period moving average, red line) - Kijun-sen line (twenty six-day moving average, green line) crosses.
For the rest of the week I expect to see the XAU/USD pair consolidating roughly between 1626 and 1588. From an intra-day perspective, the key levels to watch will be 1619 and 1607. The bulls will need to climb above 1619 in order to gain some traction and challenge the bears at 1626. A daily close above the 1626 resistance level would suggest that the buying pressure is increasing. In that case, I expect to see more resistance at 1640.40 and 1647.38 and 1652. If the pair encounters heavy resistance and breaks below the 1607, look for 1603.66, 1597.77 and 1588.
