Gold Technical Analysis and Near-Term Outlook
Gold rose to challenge $1849 resistance as called for in yesterday’s update. This level, which is split between the 38 percent retracement of the decline from $1973.3 and the 62 percent retracement from $1904.3, has held so far. Nonetheless, near-term odds still favor a continued rise due to the sustained close back above the 200-day moving average and settle (so far) above last week’s $1832 midpoint. Overcoming $1849 will call for $1862 and possibly $1872 ahead of the weekend. Key resistance and the barrier to a firm bullish near-term outlook is $1894. This is the 62 percent retracement of the decline from $1973.3 and the 38 percent retracement from $2099.2.
With that said, gold’s move up from $1767.2 lacks a wave that can support a larger rally. The retracements that have taken place during the move up have been minimal. It is rare to see a market rise above crucial resistance without an adequate wave structure. Also, due to the importance of $1849, there is a reasonable chance for a pullback to test support ahead of the weekend. This is the challenge for gold’s near-term outlook because a pullback large enough to create a wave that can sustain a larger rally will have to test the 38 percent retracement of the rise from $1767.2 around $1819. This is in line with the 200-day moving average, a close below which would signal that bears are taking control again. Settling below $1798 will confirm this and shift near-term odds in favor of $1776 and lower next week.
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