Gold finished down on the week as the news of less quantitative easing by the Fed was enough for the bears to overtake the bulls. The XAU/USD pair traded as low as 1187.20 but managed to close just above the 1200 after investors decided to take some of profit off the table on a possible double bottom formation. The primary driver of gold prices last week was the Fed's policy decision to throttle down from its ultra-accommodative monetary policy stance. I think also the perception that the stock market rally will continue through the first quarter of 2014 dulled the shiny metal's attractiveness. Because of that I will also keep an eye on the major stock markets as well as the USD/JPY pair. If stocks extend their gains, there will be even less reason for investors to buy gold.
Friday's data from the Commodity Futures Trading Commission (CFTC) show that speculative investors on the Chicago Mercantile Exchange reduced their net-long position in gold to 25904 contracts, from 26380 a week earlier. Speaking strictly based on the charts, the overall trend will remain bearish while the XAU/USD pair remains below the Ichimoku clouds almost on all time frames.
Trading within the descending channel formation dating back to the August also supports this theory. However, as I mentioned in the previous analysis, the 1180 level may remain intact in the short-term while most investors take a break for the holiday. On the 1-hour time frame, we have a bullish Tenkan-sen (nine-period moving average, red line) - Kijun-sen (twenty six-day moving average, green line) cross but in order to confirm that the pair gained enough momentum to march towards the 1225 level, the bulls have to push prices above the 1213 - 1215.80 resistance area.
Only a close above the 1225 level could ease bearish pressure and take us back to the 1237 level. If the downward pressure continues and prices break below the 1180 support level, we may see another sell-off which will target the 1160 - 1138 zone.
