Technical Sentiment: Bearish
Key Takeaways
Bears covering their short positions and the U.S. Dollar taking a breather triggered a rally in precious metals on Monday. With Gold trading again above $1,203 and Silver facing a resistance at $17.33, it remains to be seen if this is an opportunity to sell the rally or a temporary bottom forming.
Technical analysis – Gold
Gold dipped as low as $1,182.97 as soon as the markets opened on Monday, briefly touching a strong support area marked by June 2013 and December 2013 Lows. Following this event, selling pressure quickly exhausted since there was clearly not enough interest in pursuing lower levels.
During European trading hours, the yellow metal jumped higher apparently targeting $1,200 and $1,203, only to see the rally accelerate past these levels throughout the U.S. session. Gold is currently trading around $1,207 in what appears to be a search for a Lower High. That being said, Gold remains in bearish territory while trading below $1,221, where the most recent Lower High and a strong trendline will provide resistance. A larger correction could be considered, although we will analyze this situation only after a rally above the resistance, which would open the way towards $1,240, where the 200 Simple Moving Average will soon descend as well.
Free Reports:
A fresh descent below $1,200 could empower sellers to attack the main support at $1,182 again. Since traders have already cleared buy orders in this area, such an event would likely lead to a break below $1,182 on the second attempt, paving the way towards $1,153 and $1,100.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets