Gold traded in a narrow range between $1279 and $1288 yesterday, with the selling continuing after Friday's plunge below $1300. This morning, gold is down slightly again, though the trading is quiet with the 61.8% retracement of the rally from $1180 to $1434 at $1277 providing support.
The dollar is building on recent gains above 81 and looks to be heading higher in the short term - this will keep the selling pressure on gold, as will the continued equity strength.
A break below $1250 will be a bearish signal for gold and suggestive of a return to $1180 as a minimum, whilst a recovery rally from here and break of $1361 would suggest the correction was over. We still consider the downside to be the most likely course and a return to $1180 cannot be ruled out.
Support can be found at $1277, $1260, $1250, $1207 and $1180. A break of $1$180 would have serious bearish implications for gold and suggest a decline to $1000-$1050 as a minimum.
Resistance can be found at $129$1, $1300, $13$10, $1320-$1322, $1328-$1330, $1338-$1342, $1352-$1355 and $1360. A break above $1360 would be the first suggestion of a new bull trend, though it would take a break of $1434 to confirm this was the case, with a target of $1525 as a minimum.