Gold Technical Analysis: Trapped in a contracting triangle

Omkar Godbole FXStreet Contributor

Gold's 12-day-long consolidation near $1,300 has taken the shape of a contracting triangle, the 4-hour chart shows.

4-hour chart

The key moving averages (MAs) - 50, 100, and 200 - are trending north and are located one above the other, indicating the path of least resistance is on the higher side.

Therefore, the risks of a contracting triangle breakout are high. Moreover, a breakout, if confirmed, could yield a rally to $1,307 (March low).

Daily chart

On the daily chart, a golden crossover (a bullish cross between the 50- and 200-day MA) is almost confirmed.

While textbooks refer to it as a bullish pattern, in reality, the crossover represents short-term overbought conditions. This is because, it takes a great amount of effort on the part of the bulls to push the 50-day MA above the 200-day MA. Put simply, a major part of the rally has already played out by the time the crossover is confirmed.

Consequently, golden crossover confirmation is often followed by a pullback.

Gold, therefore, could see a downside break of the contracting triangle or the bullish breakout, if confirmed, could end up trapping the bulls on the wrong side of the market.

Trend: Neutral-to-bearish

XAU/USD

Overview:
    Today Last Price: 1292.7
    Today Daily change: 1.0e+2 pips
    Today Daily change %: 0.0813%
    Today Daily Open: 1291.65
Trends:
    Previous Daily SMA20: 1276.54
    Previous Daily SMA50: 1246.1
    Previous Daily SMA100: 1229.55
    Previous Daily SMA200: 1228.99
Levels:
    Previous Daily High: 1295.9
    Previous Daily Low: 1287.7
    Previous Weekly High: 1297.15
    Previous Weekly Low: 1279.35
    Previous Monthly High: 1284.7
    Previous Monthly Low: 1221.39
    Previous Daily Fibonacci 38.2%: 1292.77
    Previous Daily Fibonacci 61.8%: 1290.83
    Previous Daily Pivot Point S1: 1287.6
    Previous Daily Pivot Point S2: 1283.55
    Previous Daily Pivot Point S3: 1279.4
    Previous Daily Pivot Point R1: 1295.8
    Previous Daily Pivot Point R2: 1299.95
    Previous Daily Pivot Point R3: 1304

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.