The markets were finally back at full strength yesterday after the Easter holiday around the world. Gold prices settled lower yesterday, extending losses to another session, as the mild disappointments in U.S. data failed to have a lasting impact on the greenback. According to a report released by the National Association of Realtors, sales of previously owned homes fell 0.2% in March.
While we have bearish pressure from strong global equities markets and low inflation expectations worldwide, demand for the precious metal as an alternative investment will remain subdued. In other words, if concerns surrounding Ukraine and Russia ease and stocks extend their gains, there will be even less reason for investors to buy gold.
From a technical perspective, there will be more resistance to the upside and the XAU/USD pair will remain bearish until prices climb above the Ichimoku cloud and the Tenkan-sen line (nine-period moving average, red line) crosses above the Kijun-sen line (twenty six-day moving average, green line), at least on the 4-hour time frame.
However, the XAU/USD pair had found strong support/resistance between the 1277 and 1268 levels in the past and because of that I can’t rule out a bounce towards the 1293 (or even possibly 1300) level before sinking deeper. There are many forms of resistance (such as the bottom of the cloud and Fibonacci 38.2) lining up together at the 1312 level, so it will be a tough nut to crack. As mentioned previously, I believe that the 1268 level is a strategic point for the bears to conquer, if they are determined to dominate the market. A daily close below this support level would suggest that the market is heading towards 1256.
