Technical Analysis – Gold creates bullish correction after hitting 1,160 in near term


Melina Deltas, XM Investment Research Desk

Gold prices edge higher today and are set to post the second bullish day in a row. In the previous week, the precious metal hit a fresh 19-month low of 1,160 before heading higher. Also, the price advanced above the 20-simple moving average (SMA) in the 4-hour chart and is currently approaching the 40-SMA, with the technical indicators showing some improvement as well; the Relative Strength Index (RSI) climbed into positive territory, above the 50 level but not much, and the MACD oscillator continues the upward rally above its red-trigger line, indicating that positive momentum could hold in the short-term.

If prices continue to head higher, resistance could come from the 23.6% Fibonacci retracement level of the downleg from 1,309 to 1,160, around 1,195. A jump above this region, would reinforce the short-term bullish view and open the way towards the 1,200 psychological level.

However, should a downside movement take form again, immediate support will likely come from the 20-SMA near 1,179. Further losses could drive gold until the 1,172 before being able to challenge the 19-month low of 1,160.

Overall, the outlook remains negative since prices hold below all the moving average lines and the bearish cross between the 50- and the 200-day SMA stays in place.