Gold settled slightly higher on Thursday as pullbacks in equities markets lured some investors back to relative safety of the precious metal. It appears that the performance of the equity market will likely continue to influence the price of gold, so a strong correction in these markets might prompt deep pockets to get back into gold. Yesterday, the Labor Department reported that the number of Americans filing applications for jobless benefits decreased by 1K to 236K and data released by the Federal Reserve Bank of Philadelphia revealed that its manufacturing index advanced to 9.4 from 7.
The recent price action indicates that the war between the bulls and bears intensified in the 1235-1245 zone. If the bulls break above 1245, buying pressure could increase and push the pair to the upper band of the descending channel which currently sits at 1255. Also the bottom of the Ichimoku cloud resides at the same level so it will be a pretty tough challenge for the bulls. However, if the pair breaks through, the next stop would be the 1268 resistance level.
Breaking above this resistance might give the bulls the extra support they need to climb towards 1277 (Fibonacci 38.2 based on the bearish run from 1433.70 to 1182.35). In order to take the reins, the bears will need to drag gold prices below the 1235 support level first. If this support gives way, I think we will be revisiting 1225 eventually. A daily close below that would suggest that the bears will be targeting 1218.59 and 1213 next. Keep in mind that we have building permits, housing starts, industrial production and the University of Michigan consumer sentiment data out of the U.S. today, so expect some intraday volatility.
