Technical Analysis – Gold gets congested near tough resistance after positive gap

Christina Parthenidou, XM Investment Research Desk

Gold opened Monday’s session with a small positive gap, which settled the price slightly above its constraining simple moving averages (SMAs) and near the tough topline of the descending channel at 1,864.

A decisive close above that resistance trendline is required to keep the bulls in play. However, the 38.2% Fibonacci retracement of the August downfall at 1,883 and the surface of the Ichimoku cloud are placed in the same location, increasing the difficulty of such a violation.

The RSI and the MACD are also questioning the potential of a meaningful rally, despite showing some improvement recently, as the indicators remain close to the neutral levels.

If the precious metal finds enough buyers to pierce the 1,883 number, the door would open for the 50% Fibonacci of 1,920. Higher, the 61.8% Fibonacci of 1,956 could be a heavier burden, a break of which would push the price out of the neutral structure, and towards the key 2,000 mark.

In the event of a downside reversal, the supportive trendline stretched from the March lows, could provide another opportunity for a rebound with the help of the 23.6% Fibonacci of 1,837. If it fails to do so, selling pressure could strengthen towards the 1,790 barrier. Should the decline extend below the November trough of 1,769, re-activating the downtrend from record highs, support could be next found within the restrictive zone of 1,745 – 1,715.

In brief, gold is not expected to start a new bullish phase in the short term unless the tough wall within the 1,864 – 1,883 zone collapses.