Gold prices settled at $1227.90 an ounce on Friday, suffering a loss of $9.21 on the week. The market started the week on the back foot, breaking below the $1213 level, but with the help of the support around the $1193/1 area -where the top of the weekly Ichimoku resided- the XAU/USD pair recouped most of the losses from the previous sessions. Investors have been flocking to gold lately on growing expectations of an extended pause in the Fed’s tightening cycle. Minutes of the Federal Reserve’s latest meeting revealed that officials have become more concerned about a volatile global environment. “If the recent tightening of global financial conditions was sustained, it could be a factor amplifying downside risks” to the economy, according to the records.

I think that the path of Fed’s rate hike how this affects the greenback will be the primary driver of gold prices. Nevertheless, I will continue pay close attention to the major stock markets as the inverse correlation between gold and stocks has become more pronounced. Unlike last summer, the precious has been reacting to turbulence in global markets. Friday’s 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 117360 contracts from 98428 a week earlier. From a technical perspective, the first thing that catches my eye is the fact that the XAU/USD pair is sailing above the Ichimoku clouds on the weekly and daily time frames, plus the Tenkan-Sen (nine-period moving average, red line) and Kijun-Sen (twenty six-period moving average, green line) lines are positively aligned on both charts, suggesting that the medium-term outlook is bullish. Secondly, prices managed to hold above the weekly cloud after this recent rally invalidated the long-term descending trend line.

To the upside, there are some strong resistance levels (such as 1235 and 1250) for the buyers to break through. If prices break above 1250, then we could see a retest of the 1262/0 zone. A daily close beyond 1262 would prolong the bullish momentum and open a path to 1285. To the downside, there are a bunch of supports, with the closest being 1225 – followed by 1220. If the bears take over and drag XAU/USD below 1220, which happens to be the bottom of the hourly cloud, then 1213 will probably be the next stop. Falling through this support could pull the market back to the 1208/5 region. The bears have to capture this camp to march towards 1191. Once below 1191, look for further downside with 1181/79 and 1169/6 as targets.