Gold skyrocketed yesterday after it hit support near the 1325 level. The metal emerged above two resistance barriers in a row and currently is trading slightly above the 1340 barrier. The rally came on the back of the escalating tensions between the US and China, which increased demand for safe haven assets, such as gold. US President Trump decided to sign a memorandum targeting up to USD 60bn worth of Chinese goods and warned that this is the first of many. China’s response was quick, with the nation revealing its own plans to impose tariffs on US imports worth up to USD 3 billion.
The price structure on the 4-hour chart suggests a short-term uptrend above the prior downside resistance line drawn from the peak of the 16th of February, and also above a new potential uptrend line, taken from the low of the 20th of March.
If the bulls are strong enough to take charge again from current levels, then we expect them to aim for the 1345 barrier, defined by the inside swing low of the 16th of February, the break of which may open the way for more upside extensions, perhaps towards our next resistance of 1351.
Looking at our short-term oscillators, we see that the RSI topped within its above-70 zone and now looks able to fall back below 70, while the MACD, although above both its zero and trigger lines, shows signs that it could start topping as well. These indicators suggest that a corrective setback may be in the works before, and if, the bulls decide to shoot again.
A dip back below 1340 could confirm the case of a setback and may target the 1336 support, or the new upside support line taken from the low of the 20th of March. That said, even in case of such a retreat, we would maintain the view that the short-term bias is positive, and we would treat the setback as a corrective move.
We would like to see a decisive dip below 1336 before we abandon the bullish case. Such a break may cause the yellow metal to tumble back near the 1325 support territory.
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Article written by Charalambos Pissouros, Senior Market Analyst at JFD Brokers
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