Although the XAU/USD pair settled lower on the last trading day of the week, the weekly candle was still positive. Gold prices rose 1.1% over the course of the week as investors continued to shift money from equities to gold. Recently, there has been a constant upward pressure on the shiny metal as investors have become more skeptical about the sustainability of the stock market rally but dollar's weakness was another element.
Eventually, better-than-expected U.S. consumer sentiment data on Friday led to a small bounce in the dollar. The XAU/USD pair traded as low as after data released by the University of Michigan showed that preliminary index of consumer sentiment climbed to 82.6 in April from 80.0 a month earlier. A separate report from the Commodity Futures Trading Commission (CFTC) show that speculative investors on the Chicago Mercantile Exchange reduced their net-long position in gold to 88599 contracts, from 100145 a week earlier (beware that CFTC's data is lagging one week).
Considering the fact that gold prices are moving above the Ichimoku clouds on both the daily and 4-hour charts and in addition to that we have bullish Tenkan-sen (nine-period moving average, red line) - Kijun-sen (twenty six-day moving average, green line) cross, I don't see a technical reason to sell gold at the moment. On the other hand, the market is not in a strong bullish trend either (prices are below the cloud on the weekly chart) so I don't expect a stellar performance.
In the short term, I think the key levels to watch will be 1312 and 1323.50. The bulls will have to get through the resistance at 1323.50 before they can tackle the 1328 level. If they can maintain control and hold prices above that level, the pair will most likely head for 1351.50. On its way up, expect to see resistance at 1334.55 and 1342.30. If the bulls run out of gas and we break below 1312 support level, I think we will be revisiting 1307 afterwards. Closing behind the 1300 level would make me think that the bears are strong enough to take us back to the 1293 - 1289 area.
