Gold consolidated during the first week of December after a swing at the end of November from about 1142 to about 1221. In the 4H chart, we can see that gold was drifting back in a falling channel last week.
Breakout: As we got into the 12/9 session, gold climbed back above 1200 and broke above the consolidation pattern. Note that price has crossed above the 200-, 100-, and 50-period SMAs, and then bounced off of them as support. This is known as a bullish sling-shot signal, suggesting at least another bullish attempt.
Bullish Swing Projection: Indeed, price is threatening the previous high at 1221 as we get into the 12/9 US session. We are seeing some USD-weakness across the board, so this is mainly a USD-story. If price extends above 1221, a swing projection targets the 1265 area. (projecting the previous bullish swing of 79 pips from the 1186 pivot.)
However, before we become committed to this swing projection, we have to note that there is a key resistance in the 1235-1240 area.
Key Resistance: The daily chart shows that if the current bullish correction continues, price action will meet a falling trendline from July and the 100-day SMA in the 1235-1240 area. The daily RSI will also approach 60. If the market is still bearish, it should be done with the bullish correction in this resistance area with the RSI at 60. If price breaks above 1240 and the RSI pops up above 60, it is likely that gold is shifting from bearish to consolidation mode in the medium-term. This suggests that the 1130 low is going to stay for a while, maybe a few months as gold consolidates.
Gold is going to be at a very critical juncture. While its price action since November have been indicative of price bottoming, the bullish outlook has a key test if price approaches the 1235-1240 area.
Bearish Scenario: If price falls back below 1200 after testing the key resistance, price is still bearish, with the 1130 in sight, and with risk of falling further.
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