Bottom line: Gold might have carved a meaningful top around $1790, or could be close to forming a top soon. We need to see a break below $1670 support, to confirm a bearish reversal ahead.

Fundamental Outlook:

DAX opened gap up yesterday and managed to close higher by +1.6%, closing at 12733 mark. The indice was backed by Asian Markets, Nikkei closed the day up +1.8% and Nifty +1.47% respectively. The US Markets were no different as Dow Jones and SPX500 managed to close higher by almost +2.0%.

COVID-19 infections have crossed over 11.7 million mark and deaths over 540,000 globally. Lately, United States and India (over 700,000 now) are witnessing a steep rise in infections and many states have re-imposed lock down.

Global Markets have continued to defy and ignore most economic conditions discussed earlier, as they continue their rallies. Since March 2020 lows, indices have recovered almost all loses as investor psychology remain optimistic.

The fiscal stimulus offered by Central Banks could be the only reason behind this relentless buying of stocks. We want to remind of a similar situation in February 2020 and that too much of optimism might be a warning signal of a potential turn.

WTI Crude has again faced selling pressure around the $41.00 mark yesterday. The commodity trades below $40.50 as we prepare to publish and could slip further towards $32.00/33.00 per barrel.

Technical Analysis:

Gold is struggling to hold around recent highs at $1790.00 mark and could be vulnerable for a reversal soon. Even if bulls manage to break higher, please bear in mind that upside remains limited and the rally could be a bull trap.

Gold has yet not confirmed a bearish reversal with respect to price action and we need to see a break below $1670 before confirming. Also note that a slip below $1750 would be the first step towards carving a lower low and lower high, going forward.

Most traders might be standing aside for now waiting for a break below $1750/20 and $1670 respectively. Any counter trend rallies after that, might be good to sell against the swing highs. The yellow metal might be heading towards a major bearish reversal soon.

Prepared by

Harsh Japee, Technical Analyst.

Gold Chart

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