Gold weakened against the American dollar for a third session on Thursday as the conditions in the marketplace dulled desire for safe haven diversification. Yesterday, data from the world's largest economy were mixed. The report released by the Labor Department showed that initial jobless claims dropped by 19K to 284K but the Commerce Department said sales of new homes declined 8.1% in June. Since the Federal Reserve tied future monetary policy (i.e. timing of interest rate hikes) to labor market conditions, investors pay more attention to improvements on that front.
The precious metal has been struggling lately but investors still keep a wary eye on the developments in the Middle East and Ukraine to see if things will escalate or simmer down. Today, I will be watching the 1297 and 1286 levels. We have bearish Tenkan-sen (nine-period moving average, red line) - Kijun-sen (twenty six-day moving average, green line) crosses on the daily and 4-hour charts. Although both charts suggest there is a chance we will see the pair trading lower, I think the 1286/1283.30 area -where the Ichimoku cloud on the daily chart and a previous support level coincide- holds the key to the down side.
If the bears increase downward pressure and drag price below 1283.30, their next target will probably be the 1277 support level. To the upside, the first hurdle gold needs to jump is located around the 1297 level. If the bulls manage to push and hold prices above this level, it is likely that the XAU/USD pair will test the resistance at 1303.
