The XAU/USD pair closed yesterday's session slightly higher than opening as sharp drop in the major stock markets and the USD/JPY pair lured some investors back to the gold market. The Dow Jones industrial average closed below the 15000 level yesterday and today the Japan's Nikkei share average is trading below the 13000 level (currently at 12735.70, a loss of %4.17). It seems that the fear factor is coming back into the markets and this should be supportive for the precious metal in the near term. However, there are other important elements (such as fears of a slowdown in the Chinese economy and growing expectations that the U.S. Federal Reserve will scale back its bond buying program) which will continue to weigh on this pair. Because of that, I think the XAU/USD pair will go back and forth for some more time.
The support zone between 1354 and 1338 appears to be strong at the moment but I also think that the 1442 - 1460 will offer heavy resistance. From an intraday perspective, I will continue to watch the 1400 and 1387 levels. If the bulls defend 1387 and manage to break through 1400, I will be looking for 1408, 1413 and 1420. If prices climb above the 1420 barrier, the pair may extend its gains and target 1442. Below 1387, there will be support at 1376, 1370 and 1360. A close below 1354.50 would make be think that we are going to revisit 1338 - 1320 area. Today sees release of important economic reports from the United States such as retail sales and unemployment claims, therefore expect some volatility.
