Gold gave up some of its recent gains against the American dollar during yesterday's session as investors took a cautious stance and took some profit off the table prior to the release of the Federal Open Market Committee meeting minutes. The XAU/USD pair traded as low as $1312.56 an ounce but found some support after economic data out of the United States missed expectations.
The New York Federal Reserve Bank reported that the Empire State manufacturing index dropped to 4.5 from 12.5 a month earlier and the National Association of Home Builders' sentiment index came in at 46, down from the previous month's 56 and below expectations for a reading of 55. It is not only the FOMC meeting minutes that is coming up today; we also have PPI, building permits and housing starts data.
Since the bullish side of the boat is so overcrowded, investors will be paying more attention to Fed’s view on the economy. Currently the pair is hovering just above the 1320 level but yesterday's wick and lack of momentum makes me think that the area between 1307 and 1337 will contain the market in the short term.
In order to tackle the 1337 level, the bulls will have to break through an interim resistance at 1325. Closing above 1337 (61.8% retracement based on the bearish run from 1433.70 to 1182.35) indicates that the 1346 and 1355 levels are next possible targets. If the bears increase pressure and prices fall below 1320, expect to see some support around 1316.11 - 1315. Breaching this area might give seller the extra fuel they need to visit 1307. Closing below 1307 means we are heading back towards the 1296.30 - 1293 area.
