Gold: Bulls unable to convince and trapped below trend line resistance

Ross J Burland FXStreet

Gold has been in decline at the start of the week following good economic news from China overnight.
Gold is currently trading at $1,279.33 and has travelled between a high of $1,287.04 and a low of $1,278.21.

The precious metals sector was up 0.8% last week, but gold prices slumped from their recent corrective highs in the $1288's as investors get set for a busy week ahead, taking up some riskier diversification on the back of the Chinese weekend data showing that profits at Chinese industrial firms grew for the first time in four months. We have seen support in global equities as a result, but tonight's showdown will come in Asia with more Chinese data that needs to continue its recovery if the risk-on mood is going to be prevalent into the FOMC later this week.

A busy week ahead

First up, we have Chinese official and Caixin PMIs where markets are looking for further stability following last month's improvements. We then have EZ GDP, US manufacturing PMI, the Fed and then nonfarm payrolls. However, the backdrop to economic events is a turbulent geopolitical picture and the uncertainty there is likely to continue to supported safe-haven assets like gold.

"Given the recent weakness in interest rates, price action in the yellow metal highlights that appetite for portfolio diversification could be on the rise,"

analysts at TD Securities explained.

Gold levels

Gold has buckled at trendline resistance, although the bulls still have legs and while holding above 1276, with oversold stochastics coiled, the upside remains compelling following the recent spike from the sold support of the 38.2% Fibo that will have shaken out some stale speculative shorts. Bulls can focus on a target of 1303 (23.6% Fibo) with a look in at the trendline resistance. However, on the flipside, on a resumption of the downside below the 38.2% Fibo and 1275, prospects will be back on the 200-D EMA and confluence area of the 50% retracement target of 1250/1253 respectively.

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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