Gold prices fell 2.4% for the week but managed to close just above the bottom of the Ichimoku cloud on the daily time frame. While the focus of the market remained on the partial government shutdown, political wrangling in the U.S. Congress increased gold's attractiveness as a safe-haven asset.
Some investors believe that tapering is off the table because conditions in the job market are still far from what Federal Open Market Committee members would like to see. Just a couple of weeks ago Federal Reserve officials reduced their growth estimates for this year and next. Of course, now the key issue is how the debt limit talks will be resolved. Although the market participants are worried about a group of Republicans who want to use the debt ceiling as leverage to gain concessions from President Barack Obama, hopes are high that House of Representatives Speaker John Boehner will unite factions in his party around a plan to reopen the federal government and raise the nation's borrowing limit.
Despite several uncertainties which would generally drive gold prices higher, the lack of bullish movement is something to watch. From a purely technical standpoint, I think the XAU/USD pair will have a hard time gaining traction in either direction at this point. The key levels to pay attention will be the 1345 and 1275 levels which defined the borders of previous consolidation.
A break above the 1345 level might give the bulls extra power they need to test the 1360, 1373.15 and 1380 resistance levels but of course they have to clear the 1326/33 zone before that. However, if the bears take over and drag prices below 1302, it is likely that we will see the pair testing the next support levels at 1291 and 1275. A daily close below 1275 would certainly increase the bearish pressure. In that case, I think we will visit 1253 and 1244 eventually.
