On a daily time frame the yellow metal has been resisted at the 20-day moving average since the 16th April. Currently the 20-day moving average is at $1649.00.
To the upside the metal should find resistance at $1672.20/$1688.40, respectively these levels represent the 100-day moving average and the 38.20% retracement of the December ’11 – February ’12 move higher.
$1625.10 and $1585.90 should cap the downside; the levels being the 61.80% and 76.40% retracement of the above mentioned move, respectively.
A weaker USD and improved support for commodity currencies helped keep the price afloat ahead of this evening’s FOMC meeting. While the fed is not expected to affect any changes to it interest rate its outlook for economic growth and hints about the likelihood of QE3 should have a bearing on the metal.
The lower the interest rates are kept the lower the opportunity cost of holding gold is – hence keeping options for QE open should give gold support.
On the daily charts a pennant formation (marked in red on the below chart) suggests a breakout may be in the cards; we have to wait to see if Gold will manage to resume the longer term bullish trend that has so far stopped at $1921.17 (September ’11 highs) or whether it will break below $1522.60 area (Dec’11 lows) which level has also provided horizontal support since September’11.