Gold made a green bar almost copying the one made in the first week of December closing above the crucial zone of $1850-$1870s as dollar continued to decline. This move was again largely on expected lines given the weekly open along with the created cup and handle pattern which dismissed any bearish activity which might have happened due to last week’s candle formation while the Fed’s continued pledge to keep the interest rates low till end of 2023 also helped in adding more gains. On the fundamental front, the pandemic remains a cause of extreme worry even after the vaccine roll out as it is not weakening much rather a new strain of virus was discovered which might have been the cause of the rapid surge in cases in the ongoing second wave and it is still not clear if the vaccines will be able to protect from this new strain creating a fresh stir of uncertainty again. This surge in cases along with increased death rate has forced most of the European countries to enforce strictest measures including full lockdown(s) yet again which definitely will affect the economic recovery rather plunge the economies into recession again. The above scenario itself showcases the trend in gold which should continue as it remains the sought after asset class due to its safe haven characteristic. To watch next week – Stimulus talks, Brexit deadline and other important economic data.
On the chart –
Gold closed above the crucial resistance zone of $1850-$1870s majorly on technical front though a falling dollar too helped in the takeout of the resistance. The anticipated pattern of cup and handle was printed and broken on the upside which was the main reason behind this rally in the yellow metal and such is the influence/depth of this breakout that the ongoing bigger pattern of the flag should ideally be broken on the upside pretty soon which will result in a fresh leg of rally. We have 2 scenarios –
1. Gold closed above the support, till this is held it can go to $1886. If this is crossed it can move towards $1901. And if this is taken out it can rally to $1921.
2. Bears again got their hopes ousted post the bullish breakout except scalp trades.
Bullish view – Bulls had a $43 green bar which not only conquered back the resistance of $1850-$1870s but also fueled hopes of a bigger breakout from the flag sooner than expected due to a pattern (cup and handle) breakout in lower timeframes whose depth is atleast 55 points. Technically gold has turned ultra bullish post the breakout and would be even more bullish once the current flag/consolidation pattern breaks while fundamentally it is more or less equally buoyed as the pandemic led devastation continues which has forced many countries into lockdown(s) again due to surge in cases denting economic recovery. New highs are in the cards once the larger flag pattern breaks.
Bearishness remains off the table post the bullish breakout.
On larger terms, gold remains bullish and prices are expected to head higher.
Possible trades are on both sides but mainly on upside, gold can be bought above $1887 for the targets of $1901 and $1921 with a stop loss placed below $1875. Longer term target $1945.
Dips towards support (and breakout region) can be used to create longs for the above mentioned targets.
Shorts can be useful for scalp trades only.
On the chart –
Gold closed above the crucial resistance zone of $1850-$1870s majorly on technical front though a falling dollar too helped in the takeout of the resistance. The anticipated pattern of cup and handle was printed and broken on the upside which was the main reason behind this rally in the yellow metal and such is the influence/depth of this breakout that the ongoing bigger pattern of the flag should ideally be broken on the upside pretty soon which will result in a fresh leg of rally. We have 2 scenarios –
1. Gold closed above the support, till this is held it can go to $1886. If this is crossed it can move towards $1901. And if this is taken out it can rally to $1921.
2. Bears again got their hopes ousted post the bullish breakout except scalp trades.
Bullish view – Bulls had a $43 green bar which not only conquered back the resistance of $1850-$1870s but also fueled hopes of a bigger breakout from the flag sooner than expected due to a pattern (cup and handle) breakout in lower timeframes whose depth is atleast 55 points. Technically gold has turned ultra bullish post the breakout and would be even more bullish once the current flag/consolidation pattern breaks while fundamentally it is more or less equally buoyed as the pandemic led devastation continues which has forced many countries into lockdown(s) again due to surge in cases denting economic recovery. New highs are in the cards once the larger flag pattern breaks.
Bearishness remains off the table post the bullish breakout.
On larger terms, gold remains bullish and prices are expected to head higher.
Possible trades are on both sides but mainly on upside, gold can be bought above $1887 for the targets of $1901 and $1921 with a stop loss placed below $1875. Longer term target $1945.
Dips towards support (and breakout region) can be used to create longs for the above mentioned targets.
Shorts can be useful for scalp trades only.
Trade active
Comment:
First long target met at $1901