Gold’s bullish channel at risk; support at 50-SMA

Gold was experiencing a flat trading session around the 1,860 level during Monday’s early European hours after a not-so-encouraging week, which sent the price to a one-month low of 1,852.

Specifically, the precious metal could not attract enough buying to crawl back above the support-turned-resistance trendline, edging lower instead to test the 50-day simple moving average (SMA) at 1,856. That is where the lower boundary of a bullish channel seems to be positioned. Hence, failure to rebound here could cause a relatively sharper decline to 1,825. If the 1,800 psychological mark proves fragile too, the door will open for the flattening 200-day SMA at 1,775. Another violation at this point would officially invalidate the uptrend from autumn’s lows.

The RSI and the MACD are backing the aforementioned bearish scenario as the former is facing downside pressures below its 50 neutral mark, while the latter has well distanced itself below its red signal line and is set to enter the negative area.

On the other hand, the stochastic oscillator is showing a soft bullish divergence after bottoming out in the oversold area, feeding some optimism that the price could soon pivot. Nevertheless, sentiment may remain weak unless the price bounces above the 1,895-1,900 wall, where the 20-day SMA is located. A successful penetration higher may face some congestion around 1,930 before heading for the key resistance area of 1,950. Then, the bulls will push towards the channel’s upper band, likely charting a new higher high at 2,000.

All in all, gold traders are expected to stay on the sidelines in the short term, waiting for fresh direction below the 50-day SMA at 1,856 or above the 1,895-1,900 barrier.

About the author

Christina Parthenidou

Christina joined the XM investment research department in May 2017. She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics. Previously, she earned a bachelor of science in Economics from the University of Cyprus. Apart from foreign exchange markets, her research interests include the impact of International trade on labour markets and product development.