Buyers went looking for a break on Friday as stops were run just above the $1,350 level but that quick turned around as the dollar held firm amid some better data later in US trading. The focus as we turn to the new week is on the Fed with the FOMC meeting on Wednesday set to provide markets with a better clue on what to expect with regards to the rate outlook and the trading bias for risk assets this week.
There's some hints of hopeful optimism in early trades but that is quickly fading with European equities now near flat levels and US futures only up by 0.1%. That said, gold is still weaker amid profit taking before we approach the key risk event later in the week.
Looking at the technicals, price is starting to creep below the 200-hour MA (blue line) now and that would signal that sellers are regaining back control. If sellers manage a break here, they will establish a more bearish near-term bias in the session ahead.
Further support is seen around $1,330 before the 38.2 retracement level @ $1,326.47 comes into play. Ultimately, market participants are taking a breather for the moment after the run higher since the end of May. I still reckon gold has plenty more upside if the Fed does decide to turn more dovish this year.
But whether or not it will come as soon as this week's meeting, we'll have to see. Otherwise, if the Fed sends a more confident signal in pausing/staying neutral, then we could see a further retracement in gold as the focus will turn back towards global trade tensions to see how that will force the Fed's hand in the coming months.