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Gold bulls face first test
We’re seeing some more profit taking in gold on Tuesday, with the rebound in the dollar and stronger risk appetite likely contributing to the declines.
Gold failed to break above $1,350 on this occasion, or hold above the February high, but that doesn’t necessarily mean the rally has run its course. Price has now fallen back towards $1,320 which could be an interesting test, having previously been a notable area of resistance. A rotation off here could see last week’s highs coming under pressure again.
Gold Daily Chart
OANDA fxTrade Advanced Charting Platform
A break below here wouldn’t be particularly concerning though, as the rally that preceded it was very strong. We’ve only seen the rally correct by around a third now – a level that will be of interest to traders – but a deeper correction is hardly a red flag. The $1,300-1,310 area could be much more interesting, at which point we’ll get a much better idea of just how bullish this market is.
Gold 4-Hour Chart
As you can see on the chart above, the momentum indicators don’t show any divergences forming at this point, which may support the view that a deeper correction is on the cards.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years’ experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.
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