After a choppy session the XAU/USD pair (Gold vs. the Greenback) closed the day higher as lower prices continued to lure Asian buyers. In addition to increasing demand for physical gold, short covering ahead of the G20 meeting helped the bulls to defend the 1333 support zone. Yesterday's candle indicates that the bears are running out gas, at least for now. Although I don't expect another huge drop in the near term, I think we will eventually reach 1266 sooner or later. Of course, how the U.S. Federal Reserve plays its cards will have a strong impact in the gold market. In the meantime, I will be paying attention to the major equity markets. A massive correction especially in US and Japan equities will likely to be supportive for gold prices in the short term.
Today the key levels to watch will be 1398 and 1363. If a bullish break out occurs, I will be looking for 1411 and 1426. There is a strong resistance area which runs from 1426 up to the 1455 level. If we get up there, I will be looking for signs of exhaustion in order to go short. However, if the bulls fail to break through the 1398, this area might turn into a strong resistance and push gold prices back to the 1363 support level. A break below 1363 would suggest that we will be heading towards the 1333 level once again.
