Technical Analysis – Gold raises a bullish flag, but how strong are the bulls?

Gold optimism started to shine again after the creation of a bullish hammer candlestick on Friday, which succeeded the sharp bounce on May’s bottom of $1,786/ounce.

The price is currently pushing for a higher close slightly above the $1,810 level, trying to confirm the green bullish candlestick formation. Yet, some caution is still required given the negative trend in the RSI and the MACD, which keep hovering within the bearish area.

More importantly, the market is setting up a death cross between the 50- and 200-day simple moving averages (SMAs) after the bearish cross between the 20- and 200-day SMAs last week, suggesting that any upside correction might only be temporary and part of the original negative trend.

Nevertheless, if bullish forces persist, the precious metal will attempt to crawl above the broken support trendline seen at $1,825. Should efforts prove successful, the recovery may continue towards the $1,845 – $1,855 key region, where the longer-term SMAs and the upper boundary of the bearish channel are positioned. Further up, the price may face some congestion around the $1,870 barrier before accelerating towards the surface of the short-term bullish channel at $1,890.

On the downside, the $1,786 – $1,777 floor will remain under the spotlight. If it cracks, the downtrend could stretch towards the support zone around $1,760, while lower, all attention will turn to the 2021 barrier at $1,723.

Summarizing, gold has charted an encouraging candlestick pattern, flagging a potential turnup in the price, but negative risks haven't completely evaporated yet. Perhaps a durable advance above $1,825 could reduce skepticism and motivate additional buying.

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