Technical Analysis – Gold consolidates; bears flirting with 23.6% Fibonacci level

Anthony Charalambous, XM Investment Research Desk

Gold sellers are testing the 1488 level once again, which is the 23.6% Fibonacci retracement of the up leg from 1266.20 to 1556.92. The precious metal had deflected off the 1535 resistance, collapsing after a two-week consolidation period. The commodity faces a level which is part of a support region from 1488 – 1480, which has held from the beginning of August.

The short-term oscillators reflect negative momentum intact, as the MACD has distanced itself below its red trigger line and into the negative territory, while the RSI points down in the bearish region, steering towards the 30-level. Furthermore, the 20-period simple moving average (SMA) looks to be nearing a bearish crossover of the 100-period SMA as well, enhancing the negative view.

To the downside, if the bears manage to overcome the challenging support region of 1488 – 1480, the move could turn the still cautiously-positive bias of gold from neutral-to-bearish, possibly producing a sell-off to test the 1453 support coming from the July 19 high. Falling lower the 38.2% Fibo of 1446 could apply some pressure ahead of the August 2013 high of 1434.

In an upside scenario, if the 23.6% Fibo holds with bulls taking back control, the price could find initial resistance at the 1505 barrier until the 1510 level, where the SMAs currently reside. Climbing over, the metal could extend back to the 1535 resistance, a previous high from August 13. Another rally could draw the focus of the multi-year high of 1556.92.

Summarizing, for the short-term directional bias to unfold, a break below 1480 or above 1535 would need to occur.