Bottom line:  Gold breaks above marked resistance at $1703 and hits $1725 before pulling back. A break below $1640 would be minimum requirement to confirm a top in place.

Fundamental Outlook:

Gold prices surge to new yearly highs as the metal hits $1725 on Monday. The US Dollar has been under pressure with Fed announcing $2.3 trillion in loans to help businesses. This in turn might have added to the recent surge in Gold prices. The yellow metal is seen to be trading around $1714 at this point in writing and potential remains to test $1730/50.

Oil prices still remain under pressure and closed around 3.5% lower yesterday at 22.36. The fundamental effects over the OPEC meet and the end to price war between Russia and Saudi Arabia are yet to be seen. A production cut of over 10 million barrels per day was agreed upon last week. Oil trades around 22.50 at this point in writing and might drop to 21.30 before support comes in.

Most Global Indices have risen over 20% since their respective March lows as Central Banks have collectively made efforts to boost sentiment. However, the decline in major indices might be far from over as countries face extended lockdown due to COVID-19 pandemic.

Technical Analysis:

Gold seems to be under absolute control of bulls after pushing through resistance at $1703 and printing fresh yearly highs at $1725. Technically, the recent price surge could be seen as a bull trap as traders rush to buy Gold.

We have been calling for a swift decline in Gold price since last several weeks and today is no different as Gold hits fibonacci 0.786 retracement of the entire drop between $1920 and $1046. Please pay attention to the larger picture discussed earlier, to avoid getting on the wrong side of trade.

Upside potential remains limited to $1730/50 zone and most traders might be surprised to see a bearish reversal soon. This could last for the next several weeks and months.

Prepared by

Harsh Japee, Technical Analyst.

Gold Chart

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