Gold settled down $12.43 at $1310.91 on Tuesday, weighed down by a strong dollar. Gold prices tumbled to their lowest level in two months after the Conference Board reported that its consumer confidence index jumped to an 11-month high in August. Investors are looking ahead to Friday’s employment report that may determine how soon the Federal Reserve raises interest rates.

Since the XAU/USD pair broke the ascending trend line, I had repeated that a retreat towards the 1307.50-1304 area was quite likely. This key support held and triggered some kind of a move up. If the market can climb and stay above the 1314 level, a test of 1317.80-1317 might be realistic. The bulls have to push through that area in order to proceed to 1322/0 region where a horizontal resistance and the bottom of the hourly cloud converge. Beyond that, the bears will be waiting in the 1327/5 zone.

(Click on image to enlarge)

As stated earlier, the 1307.50-1304 area is a strategic place for the bears to conquer, if they intend to test 1300 and 1292. Breaking down below the 1292 level might lead to further downward pressure. In that case, the 1287.40 level where the bottom of the daily cloud sits will be the next stop.

(Click on image to enlarge)