Bottom line: Gold had cleared past resistance at $1747 last week and managed to print yet another high at $1765 yesterday. It is difficult to confirm a top in place but a break below $1690 should be the first step towards a bearish reversal.
Fundamental Outlook:
Gold managed to open this week into the green again and rallied to fresh highs at $1765 before reversing lower. The Fed remains committed to do whatever it takes to support the economy and there could be more stimulus coming if required. Watch out for FOMC minutes to be out tomorrow for further tone and guidance.
WTI Crude and Brent gained close to +8.0% yesterday to close at $32.20 and $35.45 per barrel respectively. It was their highest close since April 2020, backed by Global Equity markets. The SPX500 and Dow Jones also rallied to their highest levels since March 23, 2020 posting gains of over +3.0% each. News for near potential COVID-19 find by Moderna Inc. fueled the above rally, shrugging off US-China tensions at least for now.
DAX posted an impressive rally bouncing back from last week’s low at 10160 (gap opening) and closing around 11058 yesterday. The German Indice gained over +5.50% as Germany and France came up with a joint proposal for the EU recovery fund of EUR 500bn. The German and Euro zone Economic Sentiment Index to be out around 05:00 AM EST is expected to rise, which could further boost the above rally.
Technical Analysis:
Gold has broken past $1747 and also managed to print fresh highs at $1765 yesterday before reversing lower. The metal could be close to forming a top around $1770/75 mark or might have already formed one yesterday. It is good to allow prices to break below $1690, initial support to confirm a potential bearish reversal.
Gold remains vulnerable for a sharp reversal as we have been calling since several weeks but the price action fails to confirm yet. It might be good to at least avoid initiating fresh long positions as a potential top could be near.
Traders might wait for a break below $1690 before preparing to sell again. Once $1690 breaks, please allow for a pullback rally towards $1737/40 levels before initiating fresh short positions.
Prepared by
Harsh Japee, Technical Analyst.
Gold Chart
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