Technical Analysis – Gold snaps an improving pose ahead of the uptrend line

Anthony Charalambous, XM Investment Research Desk

Gold appears to have found some footing at the 1,643 level from March 26 as it creeps towards a very short-term uptrend line drawn from the 1,455.17 low of March 20. Although the simple moving averages (SMAs) are not giving the strongest and clearest trend signals, they do lean slightly to the positive picture, specifically the 50- and 100-period SMAs.

That said, the short-term oscillators are suggesting that positive directional momentum may be starting to pick up. The MACD, in the positive region, despite slipping just below its red trigger line, looks to move back above, while the RSI has restarted a sloping up course. Additionally, the rising stochastic %K and %D lines have completed a bullish crossover bouncing off the 20 oversold level.

If buying interest persists, initial resistance could come from the fresh peak of 1,671.81, which if violated could turn the focus to the 1,681 and 1,690 highs from March 9 and February 24 respectively. Overcoming these, the multi-year top of 1,703.36 could be revisited ahead of the December 2012 barrier of 1,723.

However, if sellers retake control and break below the 1,643 obstacle (previous resistance-now-support) and the present uptrend line, the commodity could drop to test the 1,621 level, that being the 23.6% Fibonacci retracement of the up leg from 1,455.17 to 1,671.81. Moving underneath, the 50-period SMA at 1,619 could interrupt the fall towards the 1,606 – 1,599 area of supports, which also encompass the 200-period SMA. Continued declines could rest at the 38.2% Fibo of 1,589 ahead of the 1,582 – 1,572 region of lows, capturing the 100-period SMA as well.

Summarizing, the precious metal’s near-term bullish bias looks to improve and a move above 1,703.36 could see a short-term bullish bias returning. However, only a dive below the uptrend line and more importantly below the trough of 1,566 and the 50.0% Fibo of 1,564 could throw into question the short-term positive outlook.