Gold challenges bullish pennant formation [Video]

Gold opened on a negative note on Monday, gently easing to last week’s lows registered within the 1,950-1,943 zone.

Technically, the bearish correction is contrasting the three-week-old bullish pennant formation, pushing for a breakout on the wrong side. The downturn in the RSI and the MACD is promoting that scenario too, though the day is not over yet, and the bears will need to close successfully below the triangle’s lower boundary at 1,960 and then extend clearly below 1,943 in order to dampen market sentiment. The 20-day simple moving average (SMA), which is currently sitting at the lower band of the short-term range at 1,932 and near the 38.2% Fibonacci retracement of the latest upleg, could be the last opportunity for a rebound before the price forcefully returns to the 1,900 round level. If downside pressures dominate below the 50-day SMA at 1,893, the 61.8% Fibonacci mark of 1,870 could next come to the rescue.

In the bullish scenario, where the price jumps back above the 1,960 threshold, the spotlight will fall back on the key 1,985 resistance. A decisive move higher would bring confidence back to the bullish pennant, though only a sustainable move above the key region of 2,000 would confirm a positive trend continuation towards the crucial ceiling of 2,070. The 2,100 psychological number could be the next target.

Summing up, despite the weakness in gold’s price, traders may not engage in selling activity unless the price decisively breaks the ongoing range below 1,930.