Gold approaches 200-DMA on USD sell-off

The XAU/USD pair was able to build on yesterday's gains on Friday as the greenback came under a renewed selling pressure following the weak macro data from the United States. The pair rose to a three-day high at $1231.64 before inching lower on profit taking. At the moment, the pair is trading at $1229.38, up 0.36%, or $4.23, on the day.

The Commerce Department on Friday announced retail sales rose 0.4% in April after an upwardly revised 0.1% rise in March.  percent gain in March. Sales rose 4.5 percent in April on a year-on-year basis. In a separate report, the Labor Department revealed that the Consumer Price Index in the U.S. advanced 0.2% after dropping 0.3% in March on a monthly basis, but on a yearly basis, the index eased to 2.2% from 2.4% and missed the consensus of 2.3%. 

• US: CPI for all items rises 0.2% in April as shelter, energy, and food indexes all increase
• US: Advance estimates of U.S. retail and food services sales for April were $474.9 billion, an increase of 0.4%

Following the data, the expectations of a Fed rate hike in June fell, pushing the US Dollar Index towards the 99 handle. The index, which remained in a tight channel around 99.50 ahead of the data, is now at 99.12, losing 0.42% on the day. Philly Fed President Harker will cross the wires later in the session. However, the greenback could struggle to gather momentum as it largely ignored Chicago Fed's Evans' comments earlier.

• Fed's Evans: Time to recalibrate and begin normalisation process

Technical outlook

The XAU/USD pair could extend its bullish move with a clean break above $1233 (200-DMA) and aim for $1241 (May 4 high) and $1250 (20-DMA). To the downside, supports align at $1224 (daily low), $1217 (May 11 low) and $1207 ( the lower arm of the daily Bollinger Band).