The key question is whether the recent bounce back from the $1180/85 area is the start of a triple bottom pattern or another false hope for the long-term bulls. While it is too early to make any conclusions, the general “risk off” tone across the financial markets suggests a bottom may have been formed, at least in the short to medium term anyway. It is encouraging to see gold chipping away at resistance around the $1240/45 area. As well as support and resistance in the past, this $1240/45 area also corresponds with the 38.2% Fibonacci retracement of the downswing from July. If gold were to close around these levels, or better, then it could lead to follow-up technical buying on Tuesday. The next key area is around $1283/6 – this is where the 200-day SMA meets the key 61.8% Fibonacci retracement level. To get there, gold will first need to break through its 50-day moving average at $1249/50, which is currently offering resistance. Meanwhile the key support level to watch is around $1220/2; if gold breaks below here then a revisit of the $1180/5 area could be on the cards. In the immediate short term, $1240 and $1232 are also important support levels to keep an eye on.
Figure 1:
Source: FOREX.com.
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