Gold finished down on the month as the initial rally faded after the bulls run out of steam around the 1340 resistance zone. The XAU/USD pair traded as high as $1344.92 an ounce on July 10th but the market entered in a declining phase afterwards. Despite the geopolitical concerns, the American dollar’s strength made gold less popular. The stock markets continued to advance on the back of encouraging corporate results and a series of economic data which provided further evidence that the world's biggest economy is continuing to improve along the lines that the Fed expects.
Although there is a growing perception that the Federal Reserve will exit from policies that have been in place for years sooner and than thought, officials want to make sure that the economy is on a solid trajectory before they consider raising interest rates. Since spring job creation has been impressive but these gains haven't been enough to lead into income growth. Meanwhile, weak demand for physical gold is also playing an important role in the market. Gold prices are (almost) at the same level where they were one year ago and because of that long term traders have become more circumspect.
Looking at the charts from a technical perspective, I still think that the descending triangle forming on the weekly chart will contain the market for the next several weeks. Yesterday's price action dragged the XAU/USD pair back below the Ichimoku cloud on the daily time frame and I think that is something to pay close attention. Bearish Tenkan-sen (nine-period moving average, red line) - Kijun-sen (twenty six-day moving average, green line) crosses on both the daily and 4-hour charts are increasing the pressure on prices but in order to reach the 1240 level, the bears will have to capture the strategic supports at 1277 and 1268 (where the bottom of the cloud sits on the weekly chart). To the upside, there will be resistances such as 1292, 1303 and 1312. Only a close above the 1312 level on a weekly basis could shift things to the bulls once again and lure more buyers (targeting the 1324.50 level at least) into the market.
