Gold prices edged slightly higher on Tuesday, putting an end to three-session streak of declines, as investors sought safety after several explosions rocked Brussels. The XAU/USD pair traded as high as $1260.12 an ounce but investors’ risk aversion faded over the course of the day and as a result the market pared gains – similar to what happened after Paris attack. Apparently market players are more concerned about hawkish comments from U.S. Federal Reserve officials.
The market is trading just above the 1240.50 level by the time I read the charts. From a technical perspective, the first thing that catches my eye is the fact that we are back below the Ichimoku cloud on the 4-hour chart after being rejected by the resistance at 1258.60. This situation highlights the sign of exhaustion (RSI/Price divergence) which I pointed out in my weekly analysis.
If the 1240.50 level is broken, then the market will probably continue to retreat and test the support in the 1235/3 region. The bears will have to capture this area so that they can make an assault on the bulls’ camp at 1226(5). Breaching the 1226/5 support is essential for a bearish continuation targeting the 1220 and 1213 levels. To the upside, expect to see resistance in the 1254.30-1258.60 zone where the top of the 4-hourly cloud, broken trend line of a rising wedge and a horizontal resistance cluster. If XAU/USD penetrates this tough barrier, I think the 1267.50 level will be the next stop. Once beyond that, the market will be aiming for 1275 and 1280.
