Technical Analysis – Gold is in anticipation mode
- Gold is trading sideways, well below its recent high
- Volatility remains elevated ahead of the US election
- Momentum indicators remain mostly bullish
Gold is trading sideways today and thus failing to forcefully react to the two negative sessions that pushed it well below its all-time high of 2,790. Month-end portfolio reallocations and profit taking could explain last week’s price movements, with the market now preparing for Tuesday’s US presidential election. The medium-term bullish trend since the June lows remains in place, supported by a series of higher highs and higher lows.
In the meantime, the momentum indicators are still bullish. The RSI is trading comfortably above its midpoint but appears unwilling to record a higher high. Similarly, the Average Directional Movement Index (ADX) is edging lower, and gradually pointing to a weaker bullish trend in gold. More importantly, the stochastic oscillator is hovering inside its overbought territory (OB) but looks ready for a break below both its moving average (MA) and OB area. Should this move take place, it could be seen as a strong bearish signal.
If the bulls remain confident, they could try to push gold above the October 23, 2024 high of 2,758, with the next target level being the all-time high at 2,790. Should events favour another upleg, the 2,800 level might end up being a small obstacle for the bulls on their way higher.
On the flip side, the bears are keen for a continuation of last week’s weakness. They could lead gold lower towards the 2,685 area where the September 26, 2024 high and the August 5, 2024 ascending trendline intersect. Even lower, the 50-day SMA at 2,638 could be the last hurdle before the bears are able test the support set by the 261.8% Fibonacci extension of March 8, 2022 – September 28, 2022 downtrend at 2,601.
To sum up, gold is trying to find its footing after last week’s correction, with market participants firmly focused on the US presidential election.
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