Gold continued it downtrend following a breakdown occurred in the week before suffering with cuts of over $10. Even with fundamentals favoring higher gold prices, the metal was unable to redeem itself out of the bear grip which looks to tighten with every passing day till the next support is reached and tested. Among all this negativity bulls can take heart from the fact the monthly 20 day moving average was respected and the prices pulled back from the lows sharply. Even with such a move and a weekly bar, trend reversal cannot be pointed out as the support line remains broken. For things to turn around either it needs to take support of the trendline or go back into the channel for bullish trend to emerge.
On the chart –
Gold kept piling on the negative returns amidst key fundamental event of trade war getting highlighted everyday which must have pushed the prices higher but it also failed to make any substantial positive impact on gold. Even the falling dollar index could not help the metal gain momentum on the upside but it helped cap the downside which may seem to stall if the dollar index remains weak. Its still gloomy for the bulls as its becoming a sell on rise kind of market. We have 2 scenarios –
1. Gold has an outside chance for an upmove but again it seems limited and possibly could be sold into as nothing has changed in the last week.
2. Gold’s downward journey is intact and a test of the support at the trendline is very likely. Gold failed to rise above the support of $1276, this can follow a retest of $1260. If this is broken it can slide till $1243.
There is no bullish view for the moment as technically gold is in a downtrend.
Bearish view – Bears kept the metal under pressure as they created a fresh low for the year on closing basis. Lower lows formation indicate the strength on the downside and its the better course to sight upon as there seems to be no buyers of gold even at lower levels. With such kind of price action its highly likely the next trendline support will be tested in coming days.
On larger terms, gold remains bearish with the prices expected to head south.
Possible trades are on both sides, gold can be sold below $1276 for the targets of $1260 and $1243 with a stop loss placed above $1284.
There are no long trades until the price moves back into the channel though bounces can be seen as long opportunities.