Gold ended flat with little movement of a % point on either side in the last week which is a normal consolidation after big moves as seen earlier. In the early half of the week gold slid towards $1214 but regained from the lows to a high of $1236 in the later half before settling at $1228 which is as flat as it could get keeping the guessing game going for both bulls and bears. Week was a dull one as most of the negativity was factored into in the previous week and nothing new was powerful enough to create large moves on the upside. Gold prices just swayed from one side to another trapping both bulls and the bears as the end result was a dampening factor since it again closed on the pivot point from where it can make any conclusive direction. Next week may be an even trickier one but if patterns are to be followed gold should make a U shaped recovery towards $1241.
On the chart –
Gold was directionless and thus tested both support and the resistance swaying in a range of $23. Gold was expected to make a move towards downside considering the outcome of French elections but all the negativity got priced in the week before thus capping the downside momentum where fresh buying was clearly visible on the lower levels.
The movement or the range of gold is shown in a circle on the chart which has a high of $1271 and a low of $1196.5 and gold is expected to trade in the same until either of the price point is taken out.
With gold again at the pivot point, we have 2 scenarios –
1. Gold prices saw a resistance at higher levels which can be said as lack of buying interest at higher levels as nothing was backing the demand for the yellow metal. Gold fell back towards its pivot/support point at $1228 (A) which is a very crucial mark. If this price point is taken out we might see a downside towards $1208 (B) which is considered to be a good support/demand area for the gold. If on any grounds this demand area fails to support the prices the metal can slide downwards to $1196 (C) which is a very crucial and a big support, it also is the lowest point of the circle in which gold is expected to move and this point must hold to keep the bulls in the game.
2. Gold retraced the losses to gain momentum to go forwards to its resistance area which is considered as a bullish since buying was clearly visible at lower levels. Also catering to bullishness is the fact the gold closed at the pivot/support of $1228 (1). If prices start to move in positive direction we can see it going towards the $1244 (2) which is a brief resistance on the chart. Now if this level is taken out on conclusive basis we can see the prices moving upwards to $1271 (3) which is the top of the circle and possibly a fair resistance level on the chart.
Bullish view – Bulls are still in the game since the price retraced from the lows and closed higher at the pivot point of $1228 from where a decisive movement can take place. Bulls were able to defend the support as lower levels attracted buying thus arresting the fall which started from the highs of $1297. If this support holds, prices are expected to head higher as most of the negativity is priced in with no major events in the corner which will lead to a selloff in gold.
Bearish view – Bears should be happy as they defended the $1237 mark which may be seen as a bearish sign as shorts were active at those levels. The close at the support also lends some relief to the bears as they can once again try to erode the prices towards lower levels. If tensions around the globe and uncertainties over U.S data subside we might see the prices going to lower levels as there seems to be lack of demand at higher prices.
On larger terms, Gold is clueless over which direction it should pursue as technicals and fundamentals are pushing and pulling the prices. Prices are expected to trade in a range as depicted by a circle in the chart. On a side note Gold is expected to go higher if patterns are to be followed.
Possible trades are on both sides, Gold can be bought around $1235 for the targets of $1244 and $1257 with a stop loss below $1224. Longer term targets $1271 and $1285.
Similarly gold can be sold near $1220 for the targets of $1208 and $1196 with a stop loss above $1230. Longer term target $1164.