Technical Analysis – Gold seems unstoppable, positive direction intact

Anthony Charalambous, XM Investment Research Desk

Gold maintains a healthy bullish bearing despite having slightly pulled back after plotting a fresh more than 8½-year high of 1,817.89. The pair’s retreat from the upper Bollinger band is also reflected in the stochastic oscillator, which displays some weakening in positive momentum, as the %K line completed a bearish crossover of the %D line, dipping from the overbought region.

Nevertheless, the predominant positive charge in the simple moving averages (SMAs) suggests a well-defined course northwards. Moreover, the MACD and the RSI may also assist in an improving picture. The MACD, deep in the positive zone, remains above its red trigger line, while the RSI is rising towards the 70 mark, promoting upcoming advances.

If buyers manage to step over the fresh high of 1,817.89 and the upper Bollinger band, located in its vicinity, the commodity may meet early resistance from the 1,828 level, that being the 150.0% Fibonacci extension of the down leg from 1,704 to 1,455. If buying interest intensifies, the 1,845 barrier may attempt to prevent the climb towards the 161.8% Fibo extension of 1,857. Overcoming these obstacles, the commodity may turn its focus towards the 1,886 peak of September 2011.

Should sellers steer southwards, immediate limitations may occur at the 1,789 level ahead of the mid-Bollinger band at 1,770. Moving under the initial key lows of 1,757 and 1,746, the commodity may encounter support from the 50-day SMA at 1,740 and the lower Bollinger band at 1,720. Extending the dive past another essential border at 1,704 may see the 100-day SMA at 1,690 and the important 1,660-1,670 section step up to the plate to challenge the decline.

Summarizing, the short-term bias is strongly bullish above 1,660 and a break above 1,817.89 would reinforce the positive picture in all time-frames.