Gold Finally Breaks The Crucial Resistance

I will start this analysis by telling you that in the past few months, the movements on gold have been a bit, let's say, weird. Gold is not behaving as it has been over the past few years. The correlation between the USD and the risk ON/OFF mode seems broken. Gold is following its own path. Luckily, technical analysis works in any situation and this is what we will focus on now.

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For the past few weeks, gold has had only one crucial resistance, which was the 38.2% Fibonacci of the main downtrend. 38.2% finally got broken. Does this mean that we have a change in long-term sentiment on gold? Unfortunately for buyers, the answer is no. The long-term sentiment remains negative, and let me explain why. First of all, we are still inside the mid-term flag formation (black lines). The flag is a trend continuation pattern and it was created after a deep drop, which promotes a further drop. The price is currently bouncing from the upper line of this formation, which only confirms this pattern and my previous sentence. Yes, the breakout of 38.2% is a crucial development in the mid-term, but it doesn’t change the big picture.

In my opinion, we can start being optimistic only after a breakout of the upper line of the flag or after a breakout of the 50% Fibonacci. I think that the current scenario is the price testing 38.2% from the top. In other words, we’re going to get a short-term drop followed by a mid-term upswing.

Disclaimer: Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial ...

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