Gold rallied 1.14% on Wednesday as the dollar retreated after disappointing retail sales data weakened the case for the federal reserve to end the era of record-low interest rates. The Commerce Department said retail sales edged up 0.1% last month and sales in August were revised down to 0% from a previously reported gain of 0.2%. A separate report from the Labor Department showed the producer price index decreased 0.5% in September. Gold found some resilience over the past few weeks and the fact that there is a distinct possibility that the Fed may delay raising rates until 2016 is driving this market's bullish activity.

From a technical perspective, there are two things catch my attention at first glance. Firstly, the market is trading above the Ichimoku clouds on both the daily and 4-hour charts and there are bullish Tenkan-sen (nine-period moving average, red line) – Kijun-sen (twenty six-period moving average, green line) crosses. Secondly, the XAU/USD pair is approaching the weekly cloud which occupies the area between 1200 and 1240. Ichimoku clouds indicate an good area of support (or resistance in our case) and when the cloud coincides with a former support/resistance level, they can be quite powerful.

That means, the resistance in the 1240/25 region could cause prices to reserve and send the market back to the bottom of the descending channel originating in mid-2013. At this point, XAU/USD will have to either manage to climb and hold above the 1185 resistance and try to break through 1192 or head back to the 1176.50 level -which also happens to be the Tenkan-sen line on the 4-hour chart- and test the support there. While clearing the resistance at 1192 might prolong the bullish momentum and start a journey to the 1202/2 area, dropping below could open up the risk of a move towards 1165.