Gold saw a volatile range bound trade last week with prices moving in a $20 band excepting the false spike towards the $1270 levels due to geo-political issue which got sold into intraday. Gold was chopping around giving no clear direction as demand was slowing when the prices moved higher resulting in a no-show week for the precious metal. Views about its future course is split but has a bearish bias attached since it was unable to stay above the crucial $1262 mark even after the momentous spike.
On the chart-
Gold is trading in-between the boundaries of $1262 and $1241, a breakout from this trading range is required to give a clear path. Gold tested the top of the channel at $1273 (A) which seems to be a cap for the moment until gold breaks out on the upper side. Gold has a support at $1241 (B) which held on the last week , but if we see this mark break gold can slide towards its next support at $1229 (C) which is a very important mark as a reversal from here is quite possible. A failure to hold may result into further selling towards $1218 then $1196 (D) as $1200 seems to have developed as a floor for the prices. If things go out of hand fundamentally and globally the metal can slide towards $1188 (E) and $1160 (F) which is very unlikely at the moment.
There could be a rounding top formation on the chart which itself sings a bearish tone.
Another thing to look on the chart is the pattern repetition as indicated with circles, according to the pattern we might be seeing a fall of $25-$30 which could be followed by buying at lower levels.
Bullish view – Bulls can take heart from previous week’s price movement as they were able to defend $1241 and even broke above $1262 intraday. If the price gets defended at $1241 continuously we maybe in for a new high sooner than expected which is a valid point for the bulls. A head and shoulder formation on the chart is also favorable for the bulls.
Another bullish aspect is a reversal from $1229, expectancy of which is very high and new highs can be reached if such a move occurs.
Bearish view – Bears were at their best as the price dropped from the highs of $1270 to close under $1262 which gives extra ammunition as the daily candle formation is very bearish due to such extreme moves. A higher dollar is also favoring the bears along with pattern repetition and failure to break $1262 4th time. A fall towards $1229 is widely expected.
On larger terms, Gold is still in a sideways mode with a bearish bias. Prices are expected to fall towards $1229 once the $1241 supports gives way, then a reversal is expected which will take the price towards new highs. For the shorter term gold should move higher towards $1260 to complete the “Head and Shoulder” formation from where a fall is anticipated.
Possible trades are on both sides , Gold can be sold at higher levels for the initial targets of $1241 and $1229 with a stop place above $1263 mark. Longer term target $1200.
Similarly Gold can be bought around $1229 for the targets of $1241 and $1263 with a stop placed below $1218. Longer term target $1305