The US dollar weakened a lot during the last couple of sessions, which was one of the reasons why GOLD also got a push. The economic releases in the US were not on the negative side, but it might be due to the oversold readings that the US dollar moved lower. Today, there is hardly any major release lined up during the NY session. So, the FX market sentiment might remain the main driver for the US dollar. GOLD has breached an important resistance area which might take it higher in the near term. We need to see how buyers react around the $1240 resistance area.
There was a bearish trend line formed on the hourly chart of GOLD, which was breached recently and caused a spike towards the $1238-40 resistance area. Buyers look like struggling around the mentioned area, which might cause a correction lower in the near term. The first and foremost support is seen around the 38.2% fib retracement level of the last leg from the $1185 low to $1238 high. Any further correction could take GOLD prices towards the broken trend line which might act as a support moving ahead. The hourly RSI is around the extreme levels, which might also act as a catalyst for a correction in the near term.
On the upside, the $1240 level is a major hurdle for GOLD which might continue to act as a resistance. A break above the same might call for more gains in the near term.
Overall, one might consider buying dips as long as GOLD is trading above the 100 MA.
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Posted By Simon Ji of IKOFX
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