Gold trades at overbought waters near 1,500 and key resistance

Gold returned to the 1,500 territory after almost two months following the breach of the 1,490 barrier, which is the 23.6% Fibonacci of the 1,266-1,566 uptrend.

The market is currently looking overbought as the RSI is flattening slightly above its 70 mark, the Stochastics are ready to complete a bearish cross above 80, and the price itself is trading around the upper Bollinger band.

A downside correction could retest the 1,500 round-level, where any violation would shift attention back to the 1,490 mark. Another leg lower may next find some footing around 1,470 and the upper line of the broken descending channel. If not, the sell-off could accelerate towards the 38.2% Fibonacci of 1,445, a break of which could bring the area between the 200-day simple moving average (SMA) and the 50% Fibonacci of 1,411 under the spotlight.

In case the price lifts the 1,515 bar, traders could initially search resistance near the September 24 high of 1,535. Higher, all eyes will turn to the 6 ½-year peak of 1,556. Should the bulls crash above that top, the next target could be the 1,620 number – a key obstacle during the 2011-2013 period – while further up, 1,680 may also come into play.

The medium-term traders, who look at the three-month picture, would resume buying interest if the market manages to rally above the 1,556 top. The fact that the 50-day SMA maintains its golden cross with the 200-day SMA, keeps optimism for a brighter outlook alive.

Summarizing, the precious yellow metal is likely to slow positive momentum in the short-term, while in the medium-term picture, the recent upturn in the price has switched the outlook from bearish to neutral.