Short-term strength in counter-trend rally
Nevertheless, the trendline closely coincides with the 20-day MA indicated as resistance at the recent small swing high of 2,639 last Thursday. It now stands at 2,639, which is a sign of strength that would indicate strength as a rise above gold’s high would have also regained the 20-day line by then. However, this would be a counter-trend rally within a descending trend channel. The channel represents downward pressure on the gold price. A rally above the minor swing high puts gold in a position to test potential resistance around the 50-day MA at 2,661, followed by the line at the top of the channel.
Weekly chart points
The price levels on the weekly chart (not shown) are also worth considering. Last week, gold closed below the 20-week MA for the first time since early October 2023. And this could happen again this week. But the potential bearish implications of a weakening weekly close will change if gold can get and stay above the 2,639 swing high, as it is also a weekly high. Thus, a breakout above will cause a bullish reversal on the weekly time frame. Could this indicate improving demand that could support a break through the upper trendline and then possibly follow with a rise above the December 12 swing high at 2,726?
Bearish below 2,596
Given current short-term patterns, a decline below Monday’s low at 2.596 is bearish and could lead to a continuation of the downtrend with a decline below the small swing low at 2.58. The possibility of an eventual test of support around the 200-day MA, now at 2,486, would then increase.
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