Commodities

Technical Analysis – Gold trades cautiously above 1300; bullish in medium term

Posted on February 14, 2019 at 9:36 am GMT

Christina Parthenidou, XM Investment Research Desk

According to the RSI, gold touched overbought levels at a nine-month high of 1,326 at the end of January when the indicator topped above 70. Consequently, the price turned slightly southwards since then, with the 1,300 key level deterring steeper declines and therefore the violation of the three-month old ascending channel. The RSI, though, continues the downward move towards its 50 neutral mark and the MACD keeps losing strength below its red signal line, both painting a neutral-to-bearish profile for the short term. In Ichimoku indicators, the red Tenkan-sen line is changing direction to the downside as well, increasing doubts about the sustainability of the channel.

Should the price drop significantly below the channel, breaking the 23.6% Fibonacci of 1,294 of the upleg from 1,196 to 1,326 as well, support could be met around the 38.2% Fibonacci of 1,276. Falling lower and further below the 50-day MA, the 50% Fibonacci of 1,259 could halt bearish action before a more important barrier appears near the 200-day MA (1,245).

Alternatively, a resumption of the bullish momentum could send the price up to the 1,326 top, while even higher, investors would be anxiously waiting for a close above 1,343 to increase buying orders. If the latter achieved, resistance could be next found within the 1,356-1,365 region.

In the medium-term picture, gold is strongly bullish given the higher highs and higher lows registered in the past three months. The 50-day MA is positively sloped and comfortably above the 200-day MA, a sign that the positive medium-term outlook may stay in place for longer.

gold

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