Commodities

Technical Analysis – Gold in a challenging situation within bearish channel

Posted on December 21, 2020 at 8:50 am GMT

Christina Parthenidou, XM Investment Research Desk

Gold resumed its bullish momentum on Monday after Friday’s pause, ticking slightly above the 1,900 level.

Technically, the short-term bias is viewed as positive given the strength in the RSI and the MACD as well as the bullish intersection between the red Tenkan-sen and blue Kijun-sen lines.

However, for the precious metal to attract new buyers, it should close decisively above the roof of the descending channel seen around 1,920, where the surface of the Ichimoku cloud and the 50% Fibonacci retracement of the 2,079 – 1,764 downleg are also placed. Such a move could see an extension towards the 61.8% Fibonacci of 1,956 and the previous peak of 1,965. Another violation at this point would break the negative structure in the four-month picture, though it is worthy to note that the bearish cross between the 20- and 50-day simple moving averages (SMAs) remains intact, supporting the downward direction in the market.

On the flip side, a pullback below the 38.2% Fibonacci of 1,882 may stretch towards the 23.6% Fibonacci of 1,837. Slightly lower, the 200-day SMA at 1,815 could attract special attention before all eyes turn to the 1,764 bottom.

Summarizing, gold is in a challenging situation as the bulls are requested to breach the descending channel to clarify their dominance. Failure to do so could bring the sellers back into play.

gold

Legal disclaimer: The material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instruments. XM accepts no responsibility for any use that may be made of these comments and for any consequences resulting in it. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. The research and analysis does not involve any specific investment objectives, financial situation and needs of any specific person who may receive it.

It has not been prepared in accordance with legal requirements designed to promote the independence of research, and as such it is considered to be marketing communication. Although we are not specifically constrained from dealing ahead of the publication of our research, we do not seek to take advantage of it before we provide it to our clients. We aim to establish, maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. We operate a policy of independence, which requires our employees to act in our clients’ best interests and to disregard any conflicts of interest in providing our services.

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losing all of your invested capital, so please make sure that you fully understand the risks involved.