The pair of gold/ USD stuck today in the declining channel, in which investors put in their consideration that, the Fed could end its Assets purchase program by the next few months.
On the last Wednesday, the Fed confirmed that it tends to reduce the frequency of massive stimulus measures. However, the Bank President, “Ben Bernanke” identified that the central bank purchases linked to what is happening in the economy. He also said: “The economy did not improve as we expect we will provide more support”. Over the medium term, the market believe that gold will lose its advantage as the safe heaven because it is clear that the decision of Fed policy is decreasing, and concerns about inflation began to disappear in the meantime the slowing growth in China and weak demand for physical gold from India could keep more pressure on the pair of gold / U.S. dollar.
Technically, the overall pattern will remain Descending sharply while prices remain in the same narrow level. On the other hand, it is possible that the level of $1266 USD/ Ounce remains as it is during the short term. The pair of gold / U.S. dollar bounced back from this area on Friday and traded at the height of $1302.36 USD/ Ounce, but the weekly settlement was below the level of $1300 USD/ Ounce.
Since the reaction was weaker than expected, the descending channel that we can see in the market together, will surrounds the price movement for the rest of the month. During today trading, I will keep my focus on the level of $1300 USD/ Ounce. In case of upward movement has been able to break this initial barrier which had a small possibility today, it would be technically possible to see a short-term bounce, targeting the top of the channel strip, which is currently at $1322 USD/ Ounce.
In that case, the market expect to see resistance at $1320, 1338 and 1354 USD/ Ounce which is so hard today. Down movement, will be here to make a support at $1285, 1277.50 and 1266 USD/ Ounce which is more expected because of the pressure from the Asian market on the US Dollar buying. Daily closing below $1266 USD/ Ounce will indicate that the next target for the downward movement will be at $1240 USD/ Ounce which is hard today.
We had to keep an eye on the US announcement today, about Durable goods and from Europe we had to wait for the IFO, in the case of positive data from USA and IFO it is expected to watch a decline in the yellow metal today to the level of $1266 USD/ Ounce.