Gold’s weekly outlook: July 03-07

Gold resumed its slide as price cracked over $20 on first day of the trading week before settling with loss of under $10 on the same day thus showing the importance of the support at $1241 after which it consolidated in this price range. Gold for the week closed above the support of $1241 which was expected with a cut of another $16 as better than expected data from America dislodged the recovery from the lows. Gold on the weekly chart has formed an ascending triangle pattern which is a bullish sign.

On the chart –

Gold withstood the flash crash where it lost substantially but again the lower level buying was clearly visible as the price rebounded from the lows to close higher above the key support of $1241. Candle formed does not emit bullishness but the formation of the ascending triangle (violet trend lines) suggests positive price action in the coming days. The circle denotes the the trading range of the gold. In the given circumstance we have 2 scenarios –

1. Gold sold off heavily in the start of the week but retraced its losses in the later half closing above the support of $1241. Thus a consolidation with a positive bias was the flavor for the week after the flash crash which bled over $20 in matter of minutes. With gold taking support at $1241 and a closing above it prices might go up towards $1248 (a) which is a decisive point for direction of the metal ahead. If this price point is crossed gold can go higher towards $1262 (A). If the momentum continues gold can mover further up towards $1278 (B) where it may find resistance as it did in earlier weeks. If this resistance area is crossed gold can move northwards to the highs of $1296 (C). A buy on dips is again advised if gold falls to sub $1230 levels.

2. Short trades are a contra call and not advisable until gold breaks the ascending triangle formation support at $1240-$1241 which will give way to $1236 (1). And if this support zone fails to hold prices can slide to the lower end of the circle at $1217 (2) which will act as a massive support and such a move is very much unlikely.

Bullish view – Bulls should be happy to take anything above $1241 as it suggests positivity as the prices remain in the pattern of ascending triangle. All the dips towards sub $1230 were bought into indicating demand at lower levels which is quite bullish. Again the downward movement of gold was technical in nature and not fundamental which is expected to reverse in coming days. If this buying pressure continues gold is expected to move higher towards $1278 in coming days due to the formation of ascending triangle.

Again there is nothing worth noting on bearish side until support of Ascending Triangle breaks and prices move lower which is unlikely in the given setup.

On larger terms, Gold continues to remain positive with a bullish bias with prices expected to move higher towards $1278 and a buy on dips is highly recommended.

Possible trades are on both sides but preferably on the long side, Gold can be bought above $1248 with targets of $1262 and $1278 with a stop loss placed under $1240. Longer term target $1297. A buy on dips is again advisable for the week with stop losses placed below $1234.
Inversely gold can be sold under $1241 for targets of $1236 and $1217 with a stop loss placed above $1251. Longer term target $1208. But short trades are unlikely in the given situation.