Gold Technicals – Potential Bullish Breakout But Outlook Bearish

Daily Chart

The Triangle pattern that was previously mentioned has finally developed further – bulls have managed to cross the 1,400 ceiling and is seeking the next level of resistance around  1,450. However before the breakout can be confirmed, price will need to break the resistance band between 1,415 – 1,425 to ensure that current rally is not a fake out similar to what we’ve seen on 23rd May. Stochastic indicator shows ample space between current levels and the Overbought region, suggesting that the bull cycle should be able to push towards 1,450 without over-extending itself from a momentum point of view. Furthermore, current reading levels are above the interim peaks seen in Feb, March and April, suggesting that Stoch line is undergoing a “bullish breakout” of its own, hence lending weight to scenario of a price bullish breakout.

However, looking from a broad technical perspective, it is hard to draw bullish narrative out of this rally. Overall trend is resoundingly bearish, and even if price manage to clear above 1,450, sterner resistances await in the form of Mar’s consolidation and the descending trendline. From a fundamental perspective, Gold total ETF holdings has fallen to a mere 69.2million Troy Ounce, the lowest since June 2011, showing that demand for gold has dropped significantly. With US stocks and yields climbing higher, investors are choosing to sell their gold holdings in search for higher returns. Recent US consumer confidence data reflects such optimism, suggesting that safe-haven demand for gold will most likely not recover anytime soon, even though S&P 500 and Dow Jones Industrials are a little bit softer recently.

More Links:
USD/SGD Technicals – 1.27 Holding with USD weighing
NZD/USD Technicals – Consolidation trumps Breakout
USD/JPY Technicals – 101 Holding on

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