The XAU/USD pair fell to its lowest level in five days after breaking below the 1312 support level triggered a sell-off. The XAU/USD pair traded as low as $1286.05 an ounce, which happens to be the 50% retracement level based on the bullish run from 1182.35 to 1392.04. Although gold recovered some of earlier losses at the end of the day, the bulls seem pretty weak at the moment.
Yesterday, data from the world's largest economy were mixed. Consumer price index was stronger than expected but Federal Reserve Bank of New York's regional manufacturing survey came out well below expectations (1.3 vs. 5.6 prior). The XAU/USD pair has been trading in a relatively tight range during today's Asian session as investors are awaiting the release of the Chinese GDP report.
From a purely technical standpoint, the pair will remain bearish in the near future unless it climbs above the 1312 level. I believe this level is a strategic point for the bulls to conquer, if they are going to stop the bears' advance. Only a close above the 1312 level could ease the bearish pressure and give the bulls a chance to march towards 1316 (or even 1323.50).
Currently, the XAU/USD pair is hovering just above the Ichimoku cloud on the 4-hour chart but yesterday's decline brought the market back inside the cloud on the daily chart. If prices resume the bearish tone, I think the first stop will be the 1296/3 area where the bottom of the cloud resides (4-hour chart). A drop below this support would place control back in the paws of the bears as we head towards the 1286 support level.
