Gold stops sell-off near 4-month lows; eyes on the downtrend line.

Gold printed fresh losses last week after remaining mostly stable in the first half of the month, slipping near a four-month low of 1,271 on Friday. The price, however, has been flirting with the lower Bollinger band in the past three sessions, while the Stochastics have already registered a bullish cross in the oversold area below 20, both justifying today’s upside momentum in the market. Still, the line connecting the lower highs from the 1,346 level, and a price below the Ichimoku cloud and its moving averages suggest that the trend is likely to hold on the downside.

Should the market extend recovery, the 38.2% Fibonacci of 1,283 of the long up leg from 1,180 to 1,346 could provide immediate resistance. Yet, only a decisive close above the descending line, currently near 1,307 and slightly below the 23.6% Fibonacci, would signal a trend reversal, shifting the focus towards 1,326   a key resistance this year.

Alternatively, a move southward could initially find support near the 50% Fibonacci of 1,263 before a crucial battle potentially starts between the 200-day simple moving average (SMA) (1,250) and the 61.8% Fibonacci of 1,244. A failure to hold above this area would probably bring a more aggressive sell-off towards the former 1,212 restrictive level.

In the medium-term picture, the outlook seems to be switching to bearish after the drop below the 1,280 level. Traders could wait for confirmation under the 50% Fibonacci of 1,263.

In brief, the short-term risk is skewed to the upside, while the medium-term outlook looks to be turning to bearish.


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This information is not considered as investment advice or investment recommendation but instead a marketing communication. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Source: XM

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