The XAU/USD pair closed yesterday's session slightly higher than opening after three consecutive days of losses. In the latest economic data, Markit's flash manufacturing PMI came in at 55.4, down from the previous month's 55.5 and below expectations for a reading of 56.2. A separate report released by the Commerce Department revealed that sales of new homes declined 14.5% to an annualized pace of 384K.
Although the data came out from the U.S. disappointed the market, this pair continues to suffer as a direct result of a weakening Chinese economy. Pattern on the charts suggest that gold prices will keep consolidating between the 1277 and 1293 levels and I believe that this tight range will contain the market in the short-term. If the bulls can build some steam and get a close above 1293, it is entirely possible that we will see the pair testing the next barrier at 1307.
Beyond 1307, the real challenges will be waiting the bulls at the 1312 level where the bottom line of the Ichimoku cloud and Fibonacci 38.2 (based on the bullish run from 1182.35 to 1392.04) converge on the daily chart and 1323.50 level. However, if the bears win the battle and drag price below the 1277 support level, they will be targeting 1268 next. Once below 1268, there will be little to slow this pair down until we reach the next key support at the 1256 level.
