Gold prices settled lower yesterday as demand for the greenback increased after the Commerce Department's figures showed that the U.S. economy expanded more than estimated in the second quarter and the Labor Department reported that the number of people who filed for unemployment insurance payment for the first time fell more than forecast last week.
Although heightened geopolitical worries and concerns over the U.S. debt ceiling have given the bulls some reasons to push prices higher, the market is back to focusing on economic data out of the world's biggest economy. The markets have been anticipating that the Federal Reserve will begin to wind down its $85 billion a month in asset purchases and because of that the upside might be limited until the next policy meeting which will be hold on September 17-18.
The 4-hour chart indicates the battle between the bulls and the bears intensified in the 1416 – 1400 zone, so I think these will be the key levels to watch in the short-term. If the bears increase the downward pressure and drag gold prices below 1400, the pair may revisit 1392 - 1380 area. Below that, the Ichimoku cloud -which indicates an area of support or resistance (in our case it represents a support zone)- resides between 1380 and 1360. To the upside, I think the bulls might have another chance to test 1425/31 resistance if they manage to break and hold 1416. Since this area caused the XAU/USD pair to reverse in the past, the bulls will have to break through in order to challenge the bears at 1455.
