Gold gained ground against the American dollar as the bulls gained some strength after the ADP private jobs data fell short of market expectations. Automatic Data Processing research institute said businesses added 135K employees in May -much less than expectation of 171K- and data released by the Commerce Department showed that factory orders rose only 1% after a revised 4.9% decline in the prior month. The Institute for Supply Management reported that its non-manufacturing index climbed to 53.7 from 53.1 in April. Gold prices are showing a tightening trading range which suggests a pending strong move, either way. Steep fall in the major stock markets and the USD/JPY pair looks supportive for gold at the moment. However, since market sentiment is ultimately driven by expectations that the U.S. Federal Reserve may start tapering accommodations sooner rather than later, I think market participants will be waiting for Friday’s official employment figures. Today sees key central bank meetings. Therefore investors will be waiting for the European Central Bank and Bank of England to announce their latest policy decisions. In other words, most traders will be reluctant to take sizable positions. From a technical point of view, the weekly and daily charts are still bearish while the pair is trading below the Ichimoku cloud.
We also have bearish Tenkan-Sen (nine-period moving average, red line) - Kijun-Sen (twenty six-day moving average, green line) crosses on both charts. On the other hand, the XAU/USD pair is holding above the cloud on the 4-hour time frame. Because of that, there is a possibility of bullish price action in the short term. In order to gain a strong momentum, the bulls have to push and hold prices above the 1414 level. If that happens, I think we will test the 1430 resistance next. Beyond 1430, the real challenge will be waiting the bears at the 1444 level. To the downside, the key area to watch will be the 1387-1372.50 support zone. If gold prices turn south and drop below this support, the bears will be dominating the market once again and we will head back to 1360.
