Summary:

  • Sellers have kept control on the gold market so far this week
  • Gold prices test a key support after a bounce from an important zone in the vicinity of $1300
  • Any declines could not exceed $5.6 based on the overbalance strategy

We pointed to a divergence between gold prices and the USDJPY, the US 10Y bond price (TNOTE on xStation5) last week. Besides, we also underlined two crucial zones which if broken could have led to a larger swing. However, bulls have not been able to breach a key resistance as of yet while the USDJPY (inverted) and TNOTE have resumed their falls at the same time strengthening the case for a continued slide in gold prices.

link do file download linkA correlation between gold prices and TNOTE along with the USDJPY (an inverted axis). Source: xStation5

There were greater falls yesterday sparked mainly by the Yellen’s speech who testified before the Congress sketching out the outlook for the economy and monetary policy alike. The next month begins tomorrow and most of the FED members seem to be convinced that a rate hike is a foregone conclusion. Before December starts there will be a crucial voting on the US tax reform in the Senate, hence there is no doubt that the outcome could influence both the US dollar and the US bonds as well. Now let’s have a closer look at a technical analysis of gold.

Weekly (W1)

November is set to end with a slight decrease, however volatility has been quite contained. Although a weekly time frame sends contrary signals, this pattern isn’t unexpected in case of a consolidation. Having said that, one needs to stress that sellers have taken control on the market, nevertheless it has not been able to break through a critical support at $1265. Do notice that this level is also underpinned by a lower boundary of an ascending channel and therefore it should not be an easy hurdle to jump over for bulls.

link do file download linkAs long as the price moves within a channel any deeper pullback appear to be ruled out. Source: xStation5

4-hour (H4)

A H4 interval helps set more specific levels which could serve as tipping points. There was an important resistance zone nearby $1300, however the price broke this level and neared another crucial support at $1280. If this level along with a lower limit of a channel is broken, it could give a rise to a pullback a touch below $1270.

link do file download linkA H4 interval shows key technical levels to watch. Source: xStation5