XAU/USD (gold price in terms of USD) faced heavy selling pressure on Tuesday, after the bulls were rejected just below $ 1280, despite worsened risk conditions after weak Chinese trade figures refuelled concerns over the world’s second largest economy. The prices witnessed nearly $ 20 sell-off after the US dollar for the second straight session, following more ECB easing chatter-led sharp declines in the EUR/USD pair. Amid a lack of fresh economic news, gold followed USD moves and completely ignored the broader market sentiment as well as the oil price action.
As for today’s trade so far, the yellow metal has once again bounced-off the crucial support zone near $ 1250 and now attempts a minor-recovery in a bid to regain $ 1260 barrier and beyond. The prices dropped sharply in the Asian trades after the greenback jolted higher amid renewed selling in EUR/USD after Goldman Sachs analysts backed calls to short the euro in wake of aggressive easing expected by the ECB at its meeting tomorrow. Gold ignored risk-off trades across the board yet again and tracked the EUR/USD price action as ECB takes centre-stage. Adding to the bearish pressure on gold, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped to 25.4 million ounces on Tuesday. However, the downside remains limited amid dropping Fed rate hike bets next week and on flight to safety ahead of China CPI data, both of which offers support to the bulls.
Technicals – Could re-take $ 1265-$ 1266 support-turned key resistance zone
As seen in the hourly charts, the prices manage to hold above 1251-1250 – crucial support zone and now look to stage a solid recovery towards the immediate resistance placed at the convergence of 100 and 20-SMA just ahead of 1262 levels. A break beyond the last, the bullion will climb further towards the crucial support-turned resistance zone around 1265, where the 50-SMA intersects. Only a decisive break above the last as well as a daily closing above it may open doors for resumption of the rally towards 1280. In case, the prices fail to break through 1265 region, we could see some consolidation in the prices between familiar trading ranges since so far today. While if the 1250 support is breached, selling pressure will intensify drowning prices to 1248-45 levels.
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