The XAU/USD pair tried to break the descending trend line, which has been creating a constant pressure on the market recently, after the Reserve Bank of India allowed more companies to buy gold from overseas but upbeat economic reports out of the United States helped sellers to parry the bulls' attacks. As a result, the precious metal erased some of earlier gains and closed the day at $1293.81 an ounce.
The Labor Department reported that jobless claims increased by 28K to 326K but the Markit's preliminary index of manufacturing activity came in at 56.2, up from the previous month's 55.4 and above expectations for a reading of 55.6. A separate report from the National Association of Realtors showed that sales of previously owned homes increased 1.3% in April. The XAU/USD pair has been range bound for the last five weeks and as you can see almost each candle printed this week has a long wick at one end.
This indicates real uncertainty and lack of momentum in the market. It seems that gold prices will continue to consolidate until we break out of this tight range which has been containing the market lately. In order to lure more investors, the bulls will have to penetrate the descending line and push the XAU/USD pair above the 1307 resistance level. If that is the case, expect to resistance in the 1312/13 and 1318/20 zones. On the other hand, breaking below the 1287/3 area would increase selling pressure and drag the market towards 1277. A close below 1277 would indicate that the bears will be aiming for 1268.
