Gold is searching for direction.
Gold followed up on Friday's near-$40 swing lower by stabilizing above major support, and August gold futures retested a high of $1,416.5.
Indeed, as data have become more mixed, the likelihood of seeing a curtailing of the bond purchasing program diminishes. On Monday, Atlanta Fed President Dennis Lockhart maintained that the central bank is committed to its bond-buying program, bringing further support to the metal.
However, the market is still in a range, and will not only have a tough time making new highs above $1,421.60, but also following through and closing at that level. The highest marked close we have seen was on May 30 at $1,412, which is still below the major retracement level.
Gold was trading right around the psychological $1,400 level on Tuesday morning, as traders continued to play the range. Use $1,396.20, slightly below the morning's $1,397.70 low, as a major support on Tuesday. However, with the large ranges we have seen recently, it is likely that we will see a dip below $1,390. Only a close below $1,380 to $1,383 will confirm a failure, and likely signal a follow-through down to a range of $1,364 to $1,367.70.