The gold market appears to be stable with the bulls and bears gaining and losing ground almost equally during the Asian session. On Wednesday the XAU/USD pair had a slightly bullish session as the American dollar weakened across the board. Although the pair bounced off of the bottom of the ascending trade channel which the market has been respecting over the last 12 weeks, the lack of strong momentum will certainly be something to watch.
Recently, gold prices have been under the pressure on reduced likelihood of a U.S. military action against Syria. In the meantime, the markets are still waiting to see how the Federal Reserve will react to the changes in the economy and how U.S. politicians deal with the debt ceiling issue. The reduction of asset purchases may be the catalyst that the bears need to push gold prices lower but this could also lead some investors to shift money from equities to gold.
At this point, I think most traders will be reluctant to take sizable positions, long or short. From a technical point of view, trading above the Ichimoku cloud on the daily chart suggests the bulls still have an advantage over the medium term.
However, the XAU/USD pair is trading below the Ichimoku cloud on the 4-hour time frame and we have bearish Tenkan-sen (nine-period moving average, red line) - Kijun-sen (twenty six-day moving average, green line) cross. Because of that, if the 1353 support level is breached, it is probable that prices will continue to grind lower. If that is the case, expect to see support at 1345, 1333 and 1324. To the upside, the 1380 and 1395 levels where the Ichimoku cloud resides will be the first critical barrier for the pair. The bulls will have to break and hold above the 1400 level in order to gain enough traction to challenge the bears at 1416 and 1425.
