Gold continued to gain ground against the American dollar as disappointing economic data out of the world's largest economy (especially on the housing front) and escalating tension in Ukraine increased the shiny metal's attractiveness as a safe-haven asset. According to a report released by the National Association of Realtors, sales of previously owned homes decreased 5.1% in January.
Although the economic reports released within the last couple of months have been worse than expected and fueled bets that the U.S. Federal Reserve will slow the cuts to its stimulus program, I don't think policy-makers will alter the course unless they see a lot of weakness in the employment report and other key indicators (for now let them to blame harsh winter weather!). They will have plenty of additional economic data until the next Federal Open Market Committee meeting.
Friday's data from the Commodity Futures Trading Commission (CFTC) revealed that speculative traders on the Chicago Mercantile Exchange increased their net-long positions in gold to 84631 contracts, from 70928 a week earlier.
From a technical perspective, trading above the Ichimoku clouds (both on the daily and 4-hour time frames) is positive for the XAU/USD pair and suggests there is potential for further gains. However, the market is still below the cloud on the weekly chart and that makes me think the bulls will have hard time gaining a strong traction in this area. With that in mind, I will be paying attention to the 1307 support level this week.
If the bulls can hold the market above this level, it is likely that we will see the XAU/USD pair testing the first barrier at 1337. Breaking through this resistance means buyers will be aiming for 1346 and 1355 next. If the bears take over and drag gold prices below 1307, expect to see some support at 1299.52 and 1293.
