Gold prices settled at $1252.72 an ounce on Friday, falling 1.36% on the week and 3.55% over the month. Worries about rising interest rates have been a major factor working against the precious metal over the past few weeks. A general sell off in the raw commodity sector also weighed on gold. An escalating trade dispute between the U.S. and China has not yet provided significant safe-haven support for gold. The latest data from the Commodity Futures Trading Commission (CFTC) showed that speculative traders on the Chicago Mercantile Exchange reduced their net-long positions in gold to 76672 contracts, from 96512 a week earlier.
XAU/USD saw a downside breakout from a rectangle pattern and moved towards the bottom of the weekly Ichimoku cloud. The market is trading below the daily and the 4-hourly Ichimoku clouds. In addition to that, we still have negatively aligned Tenkan-sen (nine-period moving average, red line) and Kijun-sen (twenty six-period moving average, green line) on the charts. As I emphasized in my previous monthly analysis, the technical outlook remains bearish and it is likely that we will see more downside pressure. However, keep in mind that there is a key support down below in the 1240/36 area there are some technical warning signals (RSI-price action divergence) emerging on the short-term charts. In other words, I wouldn't rule out a test of the broken trend line (see the daily chart) or even the daily cloud before selling pressure takes over again.
With that in mind, I think the bulls will need to lift prices above the 1272.56-1270 area to revisit 1277 and 1283/2. A weekly close above 1283 could encourage buyers and open the door to 1294/2. If the market penetrates this barrier, the next will be 1302/0. Beyond there, the 1308/6 zone stands out as a solid technical resistance. On the other hand, if prices fall through 1240/36, then the market will be aiming for 1227/5. A break below 1225 opens up the risk of a drop to 1218/15. The bears have to capture this camp to challenge the bulls waiting on the 1206/2 battleground.