Technical Analysis – Gold recoups lost ground but eyes turn to 1,662

Christina Parthenidou, XM Investment Research Desk

Gold recouped all the losses it made on Friday after stepping on the 50-day simple moving average (SMA), with the price returning to the 1,600 territory.

The short-term risk is still on the upside as the RSI has rebounded near a descending trendline and back above its 50 neutral mark, though with the MACD remaining below its red signal line despite gaining momentum, and the red Tenkan-sen stabilizing slightly above the blue Kijun-sen, some caution should be warranted.

Hence, traders will be eagerly waiting to see whether the precious metal can close above the 1,662 barrier to re-test its seven-year high of 1,689 before increasing exposure in the market. Should the price strengthen above the latter, the next stop could be within the key 1,700-1,750 zone and near the resistance line drawn from 1,298, where the bulls also paused several times during the 2012-2013 period.

Alternatively, a decline below 1,600 would shift the spotlight back to the 1,577 support area and the 50-day SMA. Breaking that base, the ascending trendline stretched from the May 21 low of 1,269 could be a bigger hurdle and a trigger for a sharper sell-off towards 1,490 and the 200-day SMA in case it gets violated. Note that the 61.8% Fibonacci of the 1,445-1,689 upleg is also in the neighborhood.

Meanwhile in the bigger picture, the market maintains a bullish structure and only a sustainable dowfall below the ascending trendline would raise concerns about the market’s direction.

In brief, the short-term risk is currently viewed as positive-to-neutral in the gold market, while overall the previous metal is still trading positive.