Gold prices settled at $1224.25 per ounce, rising 2.9% over the course of the week, as investors pushed back bets on when the Federal Reserve will increase interest rates following a new batch of disappointing U.S. data. During Friday’s session, the XAU/USD pair initially pulled back to the 1214.50 – 1212 area, which the market had struggled to break through in April, but found support and rallied after data on consumer confidence and factory activity fell short of market expectations. The University of Michigan’s preliminary consumer confidence reading for May came in at 88.6, down from a final reading of 95.9 in April and the Federal Reserve reported that industrial production declined 0.3% last month.

The latest sign of weakness in the U.S. economy suggests that the timing for the lift-off could be delayed to September or even to December and apparently the bulls are using this situation to their advantage. Recent data from the Commodity Futures Trading Commission (CFTC) showed that speculative traders on the Chicago Mercantile Exchange increased their net-long positions in gold to 77433 contracts from 72440 a week earlier. Despite the fact that medium term trend will continue torturing the bulls, the short term trend will probably continue to favor the upside. Technically, trading above the Ichimoku clouds on both the daily and 4-hour charts, combined with the Friday’s hammer which helped the market to close around the top of the weekly range, looks positive.

However, I think that prices have to anchor somewhere above the 1225 level in order for the XAU/USD pair to extend its bullish movement. In that case, there could be a run all the way back to the 1273 level but between here and there the 1245/0 and 1257 levels will be the critical points where selling pressure may return to the market. If XAU/USD starts to feel pressure from the weekly cloud and loses momentum, we will probably see prices retesting the 1214.50 – 1212 region. Closing below this support means 1207 will be the next possible target.