Gold Technicals – Facing Resistance on both Short and Long term trendlines

Price continue to post lower highs after reaching the peak on 26th April despite more news about increasing physical gold demand coming out. This is in line with what we’ve mentioned yesterday where such increase in demand will not be able to shift Gold’s longer bear trend, but merely provide short-term support. Looking at current price levels, it is reasonable to define current price action as supported within 1,450 – 1,485 consolidation, but prices certainly are heading lower after rebounding off the descending trendline during early Asian hours today.

Hourly Chart

Short-term bias is heavily in favor of bears. Beyond bouncing lower from the descending trendline, price is also trading below the rising trendline which has been supporting current rally from 23rd April. Couple this together with the fact that 1,465 interim support has been breached, increasing the bearish pressure for a move towards 1,450. However if Stochastic readings have a say, then perhaps we could still see price staying supported above 1,465. The previous venture beyond the point has failed with a hammer candlestick formed – sign of bullish reversal. However, it should be noted that recent Stoch troughs are heading higher while price peaks are heading lower, with the divergence suggesting that the bullish signal may need to be filtered. Nonetheless, should 1,465 hold, a push back towards the descending trendline is possible, but price will probably face heavy resistance around the intersection point.

Weekly Chart

Weekly Chart remains bearish with price also facing resistance in the form of intersection from Descending Channel bottom and the bottom consolidation point back in May 2011. However, should price managed to break into the Channel, it will not be surprising to see resistances turn supports keeping price afloat between 1,485 to 1,570. However ability to break above 1,570 is another issue altogether, and as discussed yesterday, there isn’t any strong fundamental reasons Gold price will be able to reach its former glory back in 2012.

Stochastic readings are encouraging for bulls though, readings are currently pointing higher with divergence between Stoch and Signal line, suggesting bullish acceleration towards the upside. However reliability of Stoch readings is an issue similar to the Short-term chart. Current trough is higher than the previous 2 interim troughs but price is sharply lower than before – suggesting that traders who take this bullish signal should pay extra attention in case it becomes a dud.

Ultimately, if Gold fails to break 1,485, we may see bearish pressure return and allow current bearish breakout to continue towards the recent 1,330 low and perhaps beyond.

More Links:
EUR/USD – Moves Up to Resistance at 1.31
GBP/USD – After Ten Week High, Eases Back Under 1.55
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