Bottom line: Gold long term structure has turned bearish against $2075 resistance. The yellow metal had taken out $1862 support over the last week, and print $1848 lows before pulling back. It trades around $1880/81 for now and remains vulnerable for another push below $1848 in the near term.
Fundamental Outlook:
DAX had rallied through 12880 highs yesterday, closing +2.36% around 12860 mark. Futures are trading around 12900 as we prepare to publish. Global indices along with Dow Jones and SPX500 managed to close higher by +1.78% and +1.92% respectively. Hopes of another stimulus has triggered the recent rally in risk assets but investors might remain cautious over further optimism.
WTI Crude prices have remained stagnant after hitting $41.46 mark on September 18, 2020. The commodity trades around $40.35 for now and might remain under pressure over the next few weeks. The OPEC might not cut further production but sluggish demand over another round of COVID-19 infections might put pressure on the commodity.
Gold had dropped to $1848 last week, breaking critical support at $1862 mark. The yellow metal might continue to lose its shine as the US Dollar might strengthen further over the next few weeks. The metal has seen some bids coming through around $1850 mark as it trades higher towards $1881 as we prepare to publish today’s update.
Technical Analysis:
Gold bears remain in control as they managed to break below $1862 interim support last week, dropping through $1848 lows. The yellow metal has managed to pull back higher towards $1880/83 highs but remains vulnerable for another push below $1848 to complete the near term wave structure. We can expect a meaningful pullback rally thereafter.
Gold had managed to hit all-time highs around $2075 mark in mid-August 2020. After having rallied for over 15 months since $1262 lows, the metal had managed to print $2075 highs. It had reversed sharply lower through $1862 levels before consolidating within a triangle. Last week, the metal managed to break out of consolidation and print fresh lows at $1848.
Most traders might be willing to hold existing short positions taken earlier and also add further around $1880/1900 resistance zone. The protective stops might be placed above $2075 while projected targets remain below $1670 over the next several weeks. Only a consistent break above $2075 would change the above bearish structure.
Prepared by
Harsh Japee, Technical Analyst.
Gold Chart
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