The XAU/USD pair closed yesterday's session slightly higher than opening as the weakness in the dollar lured some investors back into the market. The XAU/USD pair has been resilient to the bears' attacks over the last couple of days and as a result we saw prices rising to the highest levels since December 17. In economic news on Monday, the ISM (services PMI) reading wasn't so bad but clearly it was weaker than expected.
The Institute for Supply Management reported that the index of non-manufacturing activity fell to 53 from 53.9. Usually gold tends to gain during times of uncertainty and it seems that recent pullbacks in US and Japan equities will continue to be supportive for gold prices in the short term.
From a technical point of view, trading above the Ichimoku clouds on the 4-hour time frame gives an advantage to the bulls and because of that selling is not an option at the moment. As I stated last week, the charts suggest that the pair is likely to hit the top of the descending channel -where also the Ichimoku clouds reside on the daily chart- before encountering a heavy resistance.
If the bulls manage to hold prices above the 1237 support level today, they might find another chance to test the 1252 level. The bulls have to breach that resistance level in order to gain enough strength to challenge the bears at 1268. However, if the bears take over and drag prices below the 1237 level, expect to see some support at 1231 and 1225. Closing below 1225 could confirm that prices will head back to 1213 next.
