Bottom line: Gold structure remain bearish until $1765 resistance holds. The yellow metal had raised through $1763 yesterday, threatening a bullish breakout. A break below $1704 would be considered constructive for bears, going further.
Fundamental Outlook:
DAX had collapsed almost -7.0% early this month, along with its peers the Dow Jones and SPX500. The indice had collapsed from 12900 through 11600 before finding some support. Risk sentiment has whipsawed this month, with a day of rally followed by collapse the other day.
Bottom line: Fears of another wave of COVID-19 infections in the US and other countries remain high. A V-Shaped economic recovery might still be far from reality. Geo political tensions are rising amidst the border dispute between India and China, and trade war between US and China. Knowing how fragile the markets remain, a dramatic bearish reversal cannot be ruled out.
Gold prices rallied through $1763.00 yesterday, threatening to break above $1765 highs. The metal may gain further if US Dollar continues to drop (DXY had dropped nearly -0.70% yesterday). WTI Crude trades above $40.00/barrel amidst sustained demand post lock down.
Technical Analysis:
Gold rally yesterday could be seen as a test of $1765 resistance. The yellow metal trades around $1752 levels for now, and a break below $1704 support would confirm that a lower top is in place. Alternately, a break above $1765 would be short lived and a potential bull trap.
Gold has been in a corrective mode since $1920 highs in 2011. The yellow metal is required to drop below $1046, the December 2015 lows, to complete the structure. We are expecting for the last leg to resume lower from current levels ($1750/52).
It remains to be seen if bears are able to print below $1704 support to confirm a potential reversal. Aggressive traders might remain short with protective stop above $1765 and potential target below $1660 and further.
Prepared by
Harsh Japee, Technical Analyst.
Gold Chart
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