The XAU/USD pair (Gold vs. the American dollar) scored a gain of 1.97% on Monday as Russia’s growing military presence in Ukraine boosted the precious metal’s safe-haven appeal. In the latest economic data, the Institute for Supply Management's manufacturing index came in at 53.2, up from the previous month's 51.3 and below expectations for a reading of 52.3. Separately, the Commerce Department reported that consumer spending rose %0.4 in January.
It appears that gold market participants are paying less attention to improving numbers out of the U.S. since the fear factor came back into the market. As a result the XAU/USD pair managed to break above the 1337/8 resistance level which I pointed out yesterday and traded as high as $1354.67 an ounce. If prices break through 1355, it is likely that the XAU/USD pair will extend its gains and head for a test of October 28 high of 1361.76.
On the weekly chart, the bottom of the Ichimoku cloud currently sits at the same level. Under normal circumstances, I would expect to encounter strong resistance and look for a top or signs of weakness around this area but escalating tension between Russia and Ukraine might exacerbate price movements.
A close above 1361.76 could make me think that the bulls are strong enough to tackle the 1376 barrier. If the bears take over and prices start to fall, support can be found around 1346/3 and 1337. The bears will have to drag prices below the Ichimoku clouds on the 4-hour time frame at least to revisit the 1320 and 1314 support levels.
