Gold prices settled at $1267.07 an ounce on Friday, scoring a gain of 0.8% on the week, as uncertainty about economic and political stability increased desire for safe-haven diversification. The latest 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 159767 contracts, from 126724 a week earlier. The minutes from the Federal Reserve’s latest meeting showed that an interest rate increase could be on the horizon. I think as long as May jobs figures don't disappoint, the U.S. central bank will tighten in June.
While investors continue to see a rate increase as highly likely next month, they no longer see a strong case for an additional hike in December. Technically, trading above the Ichimoku clouds (the daily and the 4-hourly charts) implies that the market is likely to continue to benefit from the (medium-term) bullish outlook. We also have positively aligned Tenkan-Sen (nine-period moving average, red line) and Kijun-Sen (twenty six-period moving average, green line) lines on both the weekly and the 4-hourly time frames.
If XAU/USD can stay above the 1265 level, prices will tend to go higher. In that case, the market should visit the 1277.35-1276 area. A daily close above 1277.35 means 1283/2 and 1288 will be the next targets. Beyond there, the 1295/2 zone stands out as a solid resistance. On the other hand, if prices drop through 1265, then the 1261/59 area may be tested. Breaking down below 1259 paves the way for 1254, which happens to the top of the 4-hourly cloud. The bears have to capture this camp so that they can force the market to test 1251/0 and 1245 (the bottom of the daily cloud).