The XAUUSD pair rose to its highest level in eleven weeks as disappointing U.S. data boosted the precious metal’s safe-haven appeal. Commerce Department figures showed that sales of new homes dropped 13.4% to a seasonally adjusted annual rate of 394000 in July, well below expectations of 487000. The pair accelerated its ascent after weaker-than-expected numbers helped the bulls to push prices above the 1380 level. This resistance level had been blocking the bulls' advance for the past five days. The market players think that the world's largest economy is still far from full health and because of that the Federal Reserve may decide to delay tapering process.
Friday's data from the Commodity Futures Trading Commission (CFTC) show that speculative investors increased their net-long position in gold to 60396 contracts, from 53926 a week earlier. If future data provides evidence that the economic recovery isn’t resilient enough to reduce stimulus, gold will remain supported in the near-term. Now the question is whether or not prices will continue to rise.
We closed the week just below the Kijun-sen line (twenty six-day moving average, green line) and looking further back on the weekly chart we see that the pair failed the break through the 1415 - 1425 area during May and June. Now this area converges with the Fibonacci 38.2 retracement level based on the bearish run from 1795.75 to 1180.21.
From a technical perspective, I expect to see the bears increase the selling pressure as we approach this zone. If the charts show a reversal pattern, I might join the bears for a ride back to 1347. If that is the case, on its way down, there will be support at 1380, 1365 and 1360. However, a weekly close above the 1425 could open the doors to 1455.
