Gold prices rose $9.84 on Tuesday as the dollar continued to fall on the first trading day of the new year. XAU/USD traded as high as $1321.34 an ounce, the highest level in 16 weeks, in early Asian session today. The slumping dollar is a bullish underlying element, but it seems that the market is stalling near the $1321 level. The dollar has already significantly weakened recently, so we can see some profit taking in the short term.

XAU/USD is trading above the Ichimoku clouds on almost all time frames, suggesting that the market is likely to continue to benefit from the bullish long-term outlook. We have positively aligned Tenkan-sen (nine-period moving average, red line) and Kijun-sen (twenty six-period moving average, green line) on the daily and 4-hourly charts, along with Chikou Span/Price crosses in the same direction.

A sustained break above 1321 could foreshadow a move up to the 1226/3 area. Bulls have to produce a daily close beyond 1326 to gather momentum for 1333/2, which is the next solid resistance on the charts. However, if XAU/USD can’t pass through 1321, expect a pull back towards the Ichimoku cloud on the H1 chart. In that case, 1316 and 1310.80-1309 may be tested. A break below 1309 implies that the bears are getting ready to challenge the support in the 1306/5 zone.