Technical Overview: Gold


  Strength of the USD is a key factor determining gold prices as of late  
  Gold prices remain in the close vicinity of a key resistance level  
  Overbalance methodology generates bearish signals on the lower intervals  
Gold prices remain in the vicinity of the long-term resistance level. The correction is also visible on the other metals and taking into account recent strong gains it can be the longer and bigger one. Gold has a potential to move above $1400 mark, however the technical signals on the lower timeframe suggest deepening of the declines even towards $1300.

Recently one of the most important factors for the gold prices is weakness of the USD. It can even be the most important as gold prices do not seem to react to the signals generated by the debt and equity markets.

W1 Interval

In the moment the weekly time frame does not provide us with the clear information on the future price movements. Prices have tested the range of the false breakout of the correction equality in the previous week. Nevertheless, the descending trendline has been broken and it seems like this week’s candlestick will only leave a shadow below this support level. Having that in mind, we should look at the lower intervals for more precise signals.

Looking at a bigger picture gold prices remain between a key resistance level and a trendline that acts as a support level.

H1 Interval

Hourly interval shows a bit more clear situation. The range of the largest correction in the upward impulse has been broken what may suggest a trend reversal. This week the market also tried to defend the Elliot wave equality as a potential straight correction A=C.

Will the market form a straight correction despite the broken geometry?

The upward correction scenario cannot be ruled out, however the broken geometry suggests further declines. It was confirmed by the reaction to the downward geometry at $1347. Sellers have to break the trendline and the geometry at $1340 (orange rectangle) if they want to bring prices to the new lows. It is worth noting that the potential uptick can be limited by the resistance at 61.8% retracement level($1352,10).

The downward scenario with the use of overbalance methodology.

The only question remaining is how deep the potential correction can be. The RSI indicator and Fibonacci levels may come in handy here. Once the oversold level will be shown by the RSI indicator (30 on H4 interval) and the prices reach 38.2% or 50% retracement level in the same time the bullish signal will be generated.

The potential correction may extend to as low as $1300.