Technical Update for Gold

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Gold 4H chart 7:12AM EDT 10/2/2012

gold 10/2/2012 4H chart

Expanded consolidation pattern: Gold prices have been moving in an expanding consolidation pattern, as the market showed “false breakouts” in both directions, as seen in the 4H chart. The latest shake to the upside brought gold to the 2012-high at 1790.20, where it found some resistance so far after briefly cracking it. The 1765 area remains the “central pivot” of this consolidation pattern. So far the market has been pushing gold price up and down this pivot, but if price can start to stay on one side it shows directional bias to that side.

Bullish scenario: The preceding bullish momentum was maintained as the RSI reading stayed above 40 for the most part, given some slight elbow space. The bullish scenario for gold is a break above 1790.20, and a test of 1800 handle and a previous resistance at 1802.78. Watch out for a bearish divergence developing in the daily chart though, such a signal has preceded a significant downswing the last 2 times, toward the lows around 1530. Even if we don’t expect a return to these lows, we should anticipate the possibility of a minor retracement, maybe toward the 1765 area.

A break above the 1802.78 pivot would exposes the record high of 1920.75.

Flat or Retracement scenario: There is already a bearish divergence seen in the daily chart. During the 10/2 US session, if gold slides below 1765, it remains in consolidation with focus on the rising trendline going back to mid-August. IF price breaks lower than the current consolidation lows around 1740. The next possible support area below is around 1710.40.

Gold Daily chart 7:18AM EDT 10/2/2012

gold 10/2/2012 daily chart


Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

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