Gold prices hit their highest level in six weeks during today's Asian session as the dollar extended losses on speculations that the Fed will wait beyond September to begin tightening. Minutes from the U.S. Federal Reserve meeting released Wednesday revealed policymakers continued to express broad concerns about weak inflation and sluggish global economic growth. The steep decline in the global equity markets is also fueling demand for gold. It appears that there is a serious money flow from stock markets towards the precious metal.
The bulls have been dominating the market since prices bottomed out around the 1076 level. Not surprisingly, the XAU/USD pair accelerated its ascent after the 1125.50 resistance was broken and now we are testing the Ichimoku cloud on the daily chart. Although the short-term outlook favors the bulls, the area between the 1165 and 1176.50 level is likely to offer some resistance.
Technically, Ichimoku clouds not only identify the trend but also define support and resistance zones. The thickness of the cloud is relevant, as it is more difficult for prices to break through a thick cloud than a thin cloud. If the cloud coincides with a former support/resistance level, they can be quite powerful. With that in mind, I think the bulls will have to push the market beyond the 1165 level first, so that they can make an assault on 1176.50. However, a failure to break through 1165 could lead to some profit taking and drag prices back to the 1158 level. Breaking below this support means the XAU/USD pair could revisit the 1154/1 region.
