Gold Forecast: Eyes 38.2% Fib of Dec-Jan rally

Gold is trading at $1335 levels - down 2.27 percent from the monthly high of $1366. The technical charts indicate scope for a drop to $1316 over the next week, while bull revival is seen above the previous day's high of $1352.40.

Patterns on the Daily chart

• A downside break of the rising channel.
• Bearish price RSI divergence.
• 5-day MA has adopted bearish bias, 10-day MA is neutral.

Bears are likely gaining an upper hand as shown in the above chart and prices look set to test $1316 - 38.2% Fib R of Dec-Jan rally.

However, the RSI on the 1-hour has hit the overbought territory, while prices seem to be finding support at $1335.49 (4-hour 100-MA + 23.6% Fib R of Dec-Jan rally). Gold may develop bullish price-RSI divergence on the 1-hour chart, if prices rebound from $1335.49, in which case, the buyers may chip-in, pushing the metal higher towards $1352.40 (previous day's high). Only a daily close above $1352.40 would revive the bullish outlook.

That said, the 5-MA and 10-MA are trending lower on the 4-hour chart. So, it is likely that (potential) rebound from $1335.49 could be transient. Moreover, a rebound from $1335.49 could yield sustained rally only after the 5-MA and 10-MA (4-hr) regain bullish bias (bottomed out). So, traders need to keep an eye on the 4-hour chart.

Also, a slide to $1316 could be short-lived as equities will likely turn risk-averse once the 10-year UST yield rises above 2.76 percent, boosting demand for the safe haven yellow metal.