• Oversold gold is showing signs of life on the technical charts.
  • Risk reversals have shed bearish bias.
  • The seasonality study indicates gold has largely put on a good show in August.

Gold could be in for a much-awaited corrective rally next week. At press time, the yellow metal is trading at $1,211 - largely unchanged week-on-week, but down 11.28 percent from the April high of $1,365.

Technicals are calling a corrective rally

Daily chart

Gold has taken out the descending trend line and has built a base around $1,205, adding credence to the bullish relative strength index (RSI) divergence. As a result, a corrective rally to the descending 50-day moving average (MA) could be on the cards. AS of writing, the 50-day MA is located at $1,250.

Risk reversals have shed bearish bias


The XAU/USD (gold) one-month 25 delta risk reversals have risen from last Friday's print of -0.80 to today's level of zero, indicating the options market is no longer bearish on the yellow metal. The data only adds credence to the signs of short-term bullish reversal seen in the technical charts.

Seasonality favors gold bulls

As seen in the above chart, gold has performed well in August in 13 out of the last 17 years. These numbers, when viewed against the backdrop of the bullish technical setup and the turnaround in the options market sentiment, indicate the metal is more likely to rally over the next week or two.


  • Gold is seen rising to $1,235 over the next few days. A close above that level would only bolster the above discussed bullish factors and open the doors to $1,250.
  • On the downside, a close below $1,200 (psychological level) would shift risk in favor of a drop to $1,172 (61.8 percent Fibonacci retracement of the rally from the December 2015 low of $1,046.54 to July 2016 high of $1,375.15).

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

Latest Forex Analysis

Editors’ Picks

AUD/USD: On the back foot below 0.6600 amid coronavirus fears

AUD/USD declines to 0.6592 during the early Monday morning in Asia. In doing so, the pair remains on the back foot while extending losses after the gap-down to 0.6600 portrayed at the start of this week’s trading session.


USD/JPY extends losses below 111.50 as coronavirus spreads outside China

USD/JPY declines to 111.45, with the intra-day low of 111.28, amid the initial Asian session on Monday. That said, the pair stays under pressure as coronavirus pushes traders towards risk-safety whereas the pullback in the USD.


What you need to know for the open: Coronavirus risk-off themes rule the waves

The coronavirus remains front and centre of the theme for forex at the start of this week. Friday's close leaves a consolidative tone for today's open, if not a risk-off bias which could continue to fuel a bid into the greenback.

Read more

Gold pulls back from fresh seven-year high to sub-$1670 area

Gold prices rallied to $1,681.25, the highest since February 2013, during early Monday. The yellow metal recently benefited from the rise in the coronavirus cases outside China.

Gold News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex Majors