Gold Remains Bullish Above October’s Rising Trendline

Gold Remains Bullish Above October's Rising Trendline

After falling sharply since July, gold price (XAU/USD) stabilized last week. This can be attributed to the recent weakness in the USD across the board. We can expect this current USD-weakness in the short-term, and thus further upside in gold price. However, we should respect the prevailing trend since July. So, where can we expect (XAU/USD) to rally to before finding sellers?

Gold (XAU/USD) 4H Chart 10/14
gold 4h chart 10/14

(click to enlarge)

Gold price in the 4H chart look is starting to shift from bearish to sideways, and at the cusp of giving us some bullish signals. Here are some observations:
1) Price is staying above October’s rising trendline.
2) Price broke above a falling trendline from August.
3) Price broke above the 100-, and 50-period simple moving averages in the 4H chart.
4) The 4H RSI has broken above 60 showing loss of bearish momentum

Bearish scenario:
Let’s first look at a bearish scenario. If price breaks below 1225, it will break a local support/resistance pivot, and break below October’s rising trendline. This will signal bearish continuation and put pressure back toward the recent lows around 1183. However, the 1200-1205 area will be key. If price can hold above 1205, the bullish correction scenario is still in play. However, a break below 1200 should revive the bearish outlook.

Bullish scenario:
If price can clear above 1240 and the 4H RSI push above 70, we might have an even stronger bullish correction ahead.

Let’s stay with this bullish scenario for a moment. The daily chart shows that 1240 is also a previous support pivot, and if broken, gold opens up a bullish outlook toward the 1270-1280 area.

Gold (XAU/USD) Daily Chart 10/14
gold daily chart 10/14
(click to enlarge)

We should limit the bullish outlook to the 1270-1280 area for these reasons:
1) This was a previous support area
2) There is a falling trendline coming down from the 1345.28 high in July
3) Price will be in the middle of the SMA cluster.
We should also anticipate sellers if and when the daily RSI gets back to 60. If sellers do take over at that point, look for a bearish swing to test the 1240 area again.

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