Gold posted negative returns for the 2nd straight week falling from the highs of $1263 to close at $1203.95 for the week. Gold had dropped below the psychological $1200 level on Friday but rebounded after testing its support at $1196. Such a fall in yellow metal is accredited to U.S Fed’s interest rate decision due on 15th March. Fears over a near certainty of a rate hike pushed the dollar index higher and the gold grind-ed lower as investors flocked to less risky asset class.
On weekly chart-
Gold broke multiple supports and even threatened to crush the long term support of $1196 in the last week but managed to close over $1200 which possibly can be taken as a positive sign after 2 weeks of heavy selling.
A bullish bar created on Friday is interesting as it suggests that the selling might have been curbed and low level buying interest could have reinvigorated. On the chart a bullish-bearish ray line intersection at $1196 (B) gives additional pillar of support at that price level. Whereas a high of the bullish ray line at $1208 (A) strengthens the fact that it may continue to act as a resistance until it is not taken out conclusively, there is quite a chance that this price point may not be crossed in this week due to an important event lined up which directly has an impact on gold. Though a decision outcome which may favor gold bulls can push the prices back above $1218 mark which will be extremely positive and regarded as a 2nd leg of up-move to have started. On the flip side gold has a huge support at $1168 (C) and a test cannot be ruled out as any hawkish stance/statement might trigger a knee jerk reaction and the price can fall off the cliff which definitely will be regarded as a bearish outlook if it sustains.
On larger terms, this week is loaded with big price moving event and volatile swings are expected. Though Gold seems to have found its feet suggested by the Friday’s price movement, large moves on either side can happen even though the rate hike is mostly factored in the price. Technically gold looks bullish with prices expected to go higher in coming days/weeks with the initial targets of $1208 and $1229 and a longer term target at $1268. On the lower side $1196 seems to support the yellow metal which if broken can lead to $1182 and finally $1168.
Do you think gold has broken off ? Think twice as the chart indicates a massive bull run ahead.