The XAU/USD pair (Gold vs. the American dollar) had a positive week as weakness in the U.S. dollar helped prices boost their momentum. Concerns about the negative impacts of the U.S. Federal Reserve's plan to steadily withdraw monetary stimulus on emerging markets have been providing support for safe-haven gold since late January. The XAU/USD pair had extended its gains and jumped to a three-month high on Friday after the bulls managed to shatter the critical barrier at the 1307 level.
In the latest economic data, the University of Michigan's consumer confidence index came in at 81.2, slightly above expectations for a reading of 80.6 and figures from the Federal Reserve showed that industrial production dropped 0.3% in January. Friday's data from the Commodity Futures Trading Commission (CFTC) revealed that speculative traders on the Chicago Mercantile Exchange increased their net-long positions in gold to 71201 contracts, from 64939 a week earlier.
From a technical perspective, trading above the Ichimoku clouds on the daily time frame indicates that there is more strength and volume behind the bulls. Because of that, I will maintain a bullish bias unless gold prices drop below the 1268 level which had contained the market since December. On Monday, the key levels to watch will be 1320 and 1307. Breaking through the 1320 resistance level is essential for a bullish continuation. To the upside, expect to see resistance at 1337, 1345 and 1355. If the bears take over and the pair starts to retreat, support can be found at 1307 and 1293.
