Gold testing resistance
|Gold broke down on Friday as stocks rallied on the back of the much-stronger US nonfarm jobs report, which further fuelled optimism about the recovery. The dollar index closed higher, ending a run of losses. However, at the start of this week, the precious metal has started higher again on the back of a mixed performance from the dollar. It remains to be seen whether the metal will be able to add to its gains, or turn lower again given the ongoing equity market rally. I think there is a greater risk for gold to go down than up from here as the short-term outlook favours the bears given the ongoing risk-on sentiment.
From a technical point of view, the precious metal is currently testing THIS key resistance level at $1696/7:
Source: TradingCandles.com and TradingView
The above level was the low made on Thursday, which was taken out decisively on Friday. Once support, it is now likely to offer resistance.
If the bears do come in around here as I suspect might be the case, then gold may go on to at least drop below last week’s low at $1670, where the trapped bulls’ stop orders might be resting.
Meanwhile the bulls will have to wait for the right opportunity given the metal’s struggles over the past few weeks. So far, each breakout attempt has failed. We need to see evidence that the sellers are getting trapped, before looking for bullish ideas again.
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