In the medium term, the market maintains a neutral bias between a broad range of 1200 and 1280.
Gold staged a strong rally from lows of 1046.29 in December 2015 to a 14-month high of 1283.42 in March 2016. The rally reversed lower from this peak after RSI reached overbought levels near 70 and fell back down. This March peak could be seen as the head of a possible head and shoulders chart pattern that is in the process of being formed. This chart pattern is a trend reversal signal. A break below the neckline would confirm this pattern.
Once prices break below the neckline, and below the key 1200 level, this would strengthen deeper selling pressures.
For now, prices are testing the 23.6% Fibonacci level at 1226.62, which is the retracement of the 1046.29 to 1283.42 upleg. This is acting as an immediate support level. If prices rise above the March peak of 1283.42, the underlying bullish market structure that started in December 2015 would resume.
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