Gold gained for 3rd consecutive week on account of a Dovish Fed outcome which resulted in lower dollar index thus fueling the gold price. Gold managed to post a decent weekly gain of over $13 which was on the expected lines since a pattern was in the formation as shown in Gold’s weekly outlook: July 24-28. The crucial Fib level of 61.8% acted as a resistance in the early part of the week but was taken out during the later half which does suggest continuous bullishness. Gold is now on track to touch its highs of $1297.
On the chart –
Gold took out the retracement level of 61.8% on closing basis with a good margin which puts bullishness firmly on the table. With such a closing, its expected to go higher to its highs of $1296-$1298 where it may find good resistance as it will form a triple top. With the Fed meeting out of the way, gold can move steadily without much volatility. With pattern near completion we have 2 scenarios –
1. Gold broke through the levels of Fib which now suggests a move even more higher to $1296-$1298 zone. This move was largely on the weakened dollar index which was trading at fresh lows. With such fundamentals aiding gold, it is expected to move higher to $1271 (A) which is a trough area for the yellow metal. If gold is able to cross this area it will see more upside to $1278 (B) which is a fairly good resistance on the chart. If this resistance level is taken out, gold can head higher to $1297 (C) where its expected to see a lot of resistance on account of formation of triple top.
2. Gold is clearly in an uptrend so taking a short call is on the contra side but it is still possible if gold moves lower after completing the pattern though such a move is less likely given the breakout seen. Gold can move lower to $1251 (1) if it slides below the Fib level of 61.8% which is near $1261-$1263. If this area is taken out gold can fall further to $1241 (2) which is a good support area. If this support zone is breached gold can tumble down to $1224 (3).
Bullish view – Bulls are in the charge for the 3rd consecutive week as the price heads higher now trading in the upper part of the bollinger band which suggests continued uptrend which should last till it hits the highest point on the band. Breakout of technical levels and Fed’s dovish stance gives more impetus to gold for moving higher and maybe create a new high in the coming days/weeks. Gold is expected to register a high of $1297 or more given the scenarios which is extremely positive for the metal.
There is nothing worth mentioning on the bearish side since everything is pointing towards bullishness. This can change only if prices start to trade below $1261-$1263 which is unlikely.
On larger terms, Gold is in a strong bullish grip as the dollar index is continuously trading at new lows. Prices are expected to move higher towards $1296-$1298.
Possible trades are on both sides but largely on the upside, Gold can be bought above $1271 for the targets of $1278 and $1297 with a stop loss placed below $1261. Longer term target $1305. A buy on dips is also suggested till $1261 with a stop loss placed below $1251.
Short trades are unlikely until $1261 is breached. Gold can be sold below $1261 for the targets of $1251 and $1241 with a stop loss placed above $1271. Longer term target $1224.