Gold saw a big fall of over $40 last week as the selling pressure was incremental from the start of the week. A massive weekly red bar indicates that gold is not seeing buying at higher levels rather shorts are attracted there combined by lack of news flow regarding uncertainty over the Korean Peninsula which was one of the key reasons for the metal to fall off the cliff. Another reason which aided the fall in gold was lack of direction from the FOMC meeting on Wednesday. The week was a compelling bearish one with the price eroded to an extent that all intermediate supports were taken out including the technical support of double bottom. Gold fell from the highs of $1270 to $1226 before settling just above the support at $1228. Gold is again expected to be very volatile next week due to the outcome of French elections on Sunday the 7th.
On the chart-
Gold broke the trading range as it slipped over $40 as mentioned in the earlier post since it closed way below the $1238 mark. On positive side gold managed to take support just above the channel a-b which if it enters could be more bearish for the price. Next week could be another relentless week for the prices on either side due to the outcome of French elections. Possible 2 scenarios for the week –
1. Gold prices cracked over $40 and even failed the support of the double bottom created at $1260 which is treated as a very bearish sign for the metal. Gold is again trading at a crucial pivot/support at $1228 which if broken can send the prices south towards the $1208 (A) zones which is a fairly good support on the chart. If this price is taken out we might see a further fall towards the big support at $1197 (B) which must hold to keep bulls in the game as it did previously. In any circumstance if this huge support gives way, the price is expected to test $1164 (C) which is also the lower end of the channel but such a move looks unlikely as tension over North Korea hasn’t subsided.
2. Gold took support at $1228 signalling the fall might be arrested which is a very positive sign for the metal. If this support holds we might see the price moving forward to $1235 (1) which is widely seen as a brief resistance in the chart over the months. If bulls are able to take this out with a force we might see the prices advancing towards $1257 (2). With uncertainties still looming in the corners, prices might go higher towards $1285 (3) if $1257 is crossed conclusively.
Bullish view – Bulls should take the $1229 with both hands as they were pinned down throughout the week having no respite at all. Having closed above the support the bulls might be relieved as this signals bullishness for the prices going ahead having arrested the fall back towards $1250-1260 zones. If the support holds, its a very positive sign and prices are expected to retrace back towards the highs of $1280 as tensions over Korean Peninsula hasn’t died down completely.
Bearish view – Bears were on top of their game as they managed to erode the prices over $40 creating a massive red weekly bar with all intermediate supports taken out in one go. Failure to to hold the $1260 mark was considered as a very bearish sign which lead to such a massive fall making the bears rejoice throughout the week. Outcome expected out of French election is very bearish for gold and if it goes as predicted gold would see a massive downtrend resulting in breaking of major supports.
On larger terms, Gold is still neutral due to the uncertainties over French elections. Prices are expected to trade in a very volatile scenario with relentless moves on either sides.
Possible trades are on both sides, Gold can be bought around $1230 for targets of $1244 and $1257 with a stop loss placed below $1218. Longer term target $1285.
Similarly Gold can be sold near $1220 for targets of $1208 and $1197. Longer term target $1164.