Gold’s weekly outlook: May 01-05

Gold was very volatile last week where it fell from the highs of $1285 to a low of $1260 before settling at $1268. Gold gapped down on opening due to French election outcome followed by incremental selling which saw a brief buying at lower levels. This was sold into yet again pushing the prices lower to create a a double bottom which gave support to the metal thus allowing it to close significantly higher from the lows. Week was not convincing for it to be termed as bearish since the metal recovered from the lows aided by U.S policies regarding Tax reforms. Gold is expected to go higher next week if it manages to sustain above $1268 also helped with fresh tensions cropping up due to missile test conducted by North Korea on Saturday 29th.

On the chart –

Gold is clearly trading in a range of $1305 to $1238 marked by the channel a – b. Gold fell over $15 on the outcome of French election in last week but managed to close at the support of $1268 after creating a double bottom at $1260 levels which is seen as a positive for the metal. Next week might see some relief for the bulls but still the uncertainty prevails due to geopolitics. Possible 2 scenarios for the gold for next week –

1. Gold saw a selloff from the top and failed to sustain above $1278 even after recovering from the lows which provides a bearish signal. Yet again Gold is trading at a crucial point of $1268 (A) which seems to be a pivot point on the chart and if this point breaches gold can see further downside towards $1238 (B) which is a very good support area as its the lower end of the trading channel which gold is currently in. If this channel support fails to hold we may be heading towards the next support area of $1208 (C). Worst case if it happens, if gold slides below $1208 it can fall towards the big support area of $1196 (D) and then $1164 (E) but such moves are very very unlikely in the prevailing situations.

2. Gold’s closing at the support of $1268 (1) may be a bullish sign as a double bottom is in place at $1260 area and if this area holds it may provide a spring board to the prices to jump towards $1280 (2) which is a good resistance on the chart. If the bulls take out this mark on a conclusive basis gold is headed to fresh highs at $1305 (3). Some of this bullishness is due to the fresh tensions cropping up in North Korean Peninsula which if heats up can propel the prices even higher than $1305.

Bullish view – Bulls should be happy as they defended the $1260 zone twice and even managed to close at the support of $1268. Above the $1268 mark, it will make the bulls on top as it provides directive movement in gold to the upside towards $1280 and $1305 levels. Gold held on the support of $1260 in a bearish week which is an extremely bullish sign as a double bottom is formed there and the prices are expected to go higher amidst fresh tensions over North Korea and also technically.

Bearish view – Bears were at their best as they pegged back the prices over $15 from the high and managed to defend $1278 not allowing the bulls a freeway style recovery. Rejection of $1278 was considered as bearish and bears did what they were supposed to that is slackening the prices towards sub $1260s and even testing the support of $1260. Now if the Korean Peninsula tensions are tackled, a downtrend is expected for the metal towards $1238 zones.

On larger terms, Gold looks neutral to a fairly high bullish bias. Prices are expected to be volatile with an upward potential as tensions fail to give way to a smooth sailing.

Possible trades are on both sides, Gold can be bought around $1270 for the targets of $1280 and $1296 with a stop loss placed below $1260. Longer term target $1305.
Gold can be sold around $1260 for targets of $1248 and $1238 with a stop loss placed above $1270. Longer term target $1208.

gold weekly 7

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