By: DailyForex.com
The XAU/USD pair had an interesting day with the bulls and bears gaining and losing ground almost equally. Lately the biggest influence on the gold price has been rising expectations that the Fed will keep using economic stimulus to bolster growth until it reaches its target (i.e. the unemployment rate below 7%). Data released by the Federal Reserve Bank of New York showed that manufacturing in the region climbed to 9.5 from 7.8 last month but weaker-than-expected U.S. retail sales numbers limited the dollar's advance. It appears that the battle between bulls and bears will continue to intensify in the 1300 - 1266 area as the market participants await Federal Reserve Chairman Bernanke's semi-annual testimony on monetary policy. He will testify before the Congress on Wednesday and Thursday. Because of that, I think it will be hard to trade gold in the short-term.
At this point, it is hard to tell whether the corrective bounce which started on 28 June is complete. Since the market is paying extra attention to the central bank's strategy for how and when to wind down the quantitative easing program, his words will be very important. Last Wednesday Bernanke said “Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy”. If he reiterates his comments from last week, I think the bulls will try to break through the 1300 barrier. If that happens, it is quite likely that the pair will test the April 16 low of 1321.52. However, if the bears regain their strength and drag prices below the 1266 support level, I will be looking for 1253.51. Below that, there will be some support at 1248. If this support is breached, I think we will revisit the 1222 level in a short time.
