Gold finally had a decisive week this time around breaking through crucial support on the back of rising dollar after weeks of consolidation. With a fall of over $20, gold saw selling on the last day of the week where it lost ground at a very quick pace. The selloff was not only limited to gold it crept to other commodities as well showcasing the strength of the rising dollar which may continue to rise further adding woes to the yellow metal. With the support broken trend shifts to the hands of bears but even in this situation gold remains a buy on dips as overall trend on larger timeframe is still bullish.
On the chart –
Last week played out to be a decider for the momentum of the yellow metal which fell prey to the bears. New low for the year was registered which speaks plenty itself regarding the shift in the trend but things are not so easily falling to full bear grip as further supports levels are there which if respected might lead to bounce back in gold and thus the trend. On the chart –
1. Gold had a breakdown and support lines were broken, for metal to turn bullish it has to get back into the channel again. Though a rise to retest the channel support cannot be ruled out.
2. Gold cracked through the supports and finally made a decisive move after many days. If it slides further it can go till $1276 where it should find some resistance. If this is broken it can fall towards $1260. If this is breached it can go lower till the support of the long term trend line at $1243.
Bullish view – Nothing much can be viewed as bullish given the movement which happened on Friday. For things to turn bullish price must re-enter the channel.
Bearish view – Bears ripped through the supports crashing gold to this year’s lowest point as they gained momentum on the downside. Bears are here to stay till the channel support which now is the resistance is held and they can drive the prices further lower to test the next support line. The price action and the momentum are with the bears so new lows cannot be ruled out in coming weeks.
On larger terms, Gold has turned bearish after a very long sideways movement trapped into the trading range of $1300-$1370 which has now been conclusively broken. Prices are expected to head lower to test the next support line but bounces towards the previous support cannot be ruled out.
Possible trades are on both sides, gold can be sold below $1281 for the targets of $1276 and $1260 with a stop loss placed above $1295. Longer term target $1243.
There are no long trades until the price moves back into the channel.