Gold Technical Updates

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Gold (XAU/USD)

Gold

Gold had a very sharp slide in the middle of last week. It appears to have flattened in the medium term. It is in congestion, reflecting indecision. But after every period of indecision is a period of decision, and a trend to some degree. Let's see if we will have a short-term bearish trend in the context of a medium term side-ways consolidation.

  • In the 1H chart, gold is spotted to be in congestion, lower highs, higher lows. It can be argued that a triangle is forming.
  • The upside opens back up above 1900, at which point a retest of the 1920 high, with the 1950 target to open up if 1920 breaks for gold to record fresh record highs.
  • However, if the market stays below the 200SMA in the 1H chart, and then pushes the RSI below 40 and then 30, we would have some signs of bearish intent.
  • More importantly, if the market breaks below 1820, we have price action breaking out of the rising support shown in the 4H chart, which opens up some bearish outlook in the short-term first back to the 1790-1800 September low.
  • The 4H chart shows a swing projection close to the 1760 area. With gold, it is probably prudent NOT to have high expectations for a strong bearish correction.
  • A more conservative target might be the 1775-1786 area, just above the 200SMA towards the 61.8% retraceement level.
  • With the market monitoring the Eurozone crisis, weak EUR is reflective of risk aversion.
  • Gold, usually rallies in times of risk aversion because of its safe-haven status.
  •  Therefore, for gold to continue lower in the short-term, we probably would also see the EUR stabilize after falling from 1.4550 to 1.35.

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Fan Yang CMT
Chief Technical Strategist
FXTimes