Technical Analysis – Gold moves sideways after extreme rally to 9-year top

Melina Deltas, XM Investment Research Desk

Gold prices continued the extreme bullish rally that started on March 20, posting a new nine-year peak of 1,817.89. But the commodity may see an overbought market as the RSI is turning lower, while the MACD is developing near the trigger line at the moment, signalling that the price is heading sideways in the very short-term. The 20- and 40-period simple moving averages (SMAs) and the Ichimoku lines are endorsing a horizontal move.

More increases could find resistance at the 161.8% Fibonacci extension level of the down leg from 1,705 to 1454 at 1,857. Above that, the next strong hurdle to have in mind is the September 2011 high of 1,920.

On the other hand, a drop beneath the SMAs could hit the 1,789 support, which stands near the lower surface of the Ichimoku cloud ahead of the 23.6% Fibonacci retracement level of the up leg from 1,671 to 1,817.89 at 1,782, which overlaps with the 100-day SMA. Below that, the 1,761 barrier, which is the 38.2% Fibonacci, could attract attention.

Overall, the yellow metal has been in a strong ascending move and only a significant decline beneath the 61.8% Fibo of 1,726 may change this outlook.