Gold prices ended Tuesday’s session up $20.76, extending gains to a second-straight session, as the dollar retreated after Federal Reserve Chair Janet Yellen stressed the need to be cautious in deciding when to raise interest rates. “Given the risks to the outlook, I consider it appropriate for the committee to proceed cautiously in adjusting policy. This caution is especially warranted because, with the federal funds rate so low, the FOMC’s ability to use conventional monetary policy to respond to economic disturbances is asymmetric,” Yellen said in remarks to the Economic Club of New York.

Not surprisingly, breaking through the initial barrier in the 1226/5 area lured buyers into the market and provided additional momentum. The XAU/USD pair is currently trading at $1240 an ounce, as the market inched lower after facing resistance in the 1243-1240.50 region. Any failure to penetrate 1243-1240.50 could see drop to the 1235/2 support – which could be a good level for long trades if it holds. However, keep in mind that we have a weak bullish Tenkan-sen (nine-period moving average, red line) – Kijun-sen (twenty six-period moving average, green line) cross on the 4-hour chart.

In other words, if the 1235/2 support can’t reverse prices, the bulls will probably have to wait a little longer as the market will have a tendency to return the 1228.50-1225 area. Closing back below 1225 would open up the risk of a move towards 1220 at least. As I mentioned in my previous analysis, the 1243-1240.50 is the key area for the bulls to conquer if they intend to push prices higher. Once beyond that, look for further upside with 1249.50 and 1258.60-1255.50 as targets.