The XAU/USD pair continued to slide and closed lower than opening yesterday. The American dollar strengthened across the board after the minutes from the Federal Open Market Committee's December policy meeting reinforced expectations asset purchases will be finished later this year and ADP jobs data beat expectation. According to the records, “Committee participants generally viewed the increases in nonfarm payroll employment of more than 200000 per month in October and November and the decline in the unemployment rate to 7 percent as encouraging signs of ongoing improvement in labor market conditions”.
The minutes also showed that “A majority of participants judged that the marginal efficacy of purchases was likely declining as purchases continue”. Data released by the ADP Research Institute revealed that private sector added 238000 jobs in December, well above expectations of 199000. Although the ADP numbers aren't so reliable predicting the government's data, they are pointing to a better non-farm payrolls reading on Friday.
The gold market has been going back and forth for the last 5 days and the lack of strong momentum will certainly be something to watch. On the 4-hour time frame, the XAU/USD pair is still supported by the Ichimoku clouds right below. Because of this, until prices make a sustained break below the 1213 level, I will think this market as more of an upward bias in the short term. However, the market still looks weak and since there is potential for further declines, it might be too early to say we've seen the bottom for this year.
To the upside, the first challenge will be waiting the bulls at 1237. If prices break through, the bulls will be aiming for 1242. A daily close above the 1242 level (which also happens to be the Fibonacci 23.6) would make me think that the bulls will likely continue their advance towards the next strong resistance at 1251.60. If prices resume the bearish tone of the last few days and break back below the 1225 level, possibility of 1215/3 printing on the chart will increase. Closing below 1213 would suggest that the bulls will have to wait a little longer as the bears will be targeting the 1205 support level next.
