Is the trend still our friend on gold?
The precious metal has formed lower highs and lower lows connected by a descending channel visible on its 4-hour time frame.
Price is testing the channel resistance, still deciding whether to bounce or break.
Gold (XAU/USD) 4-hour Chart by TradingView
A combination of geopolitical concerns stemming from Middle East tensions and dollar jitters ahead of another batch of top-tier data appear to be propping gold prices up lately.
In the previous trading week, XAU/USD managed to hold on to its gains, as market players didn’t seem too impressed by the FOMC minutes. To top it off, risk-taking buoyed by the global stock market rally appeared to lift commodities overall.
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Investors are now looking ahead to the release of the U.S. preliminary GDP figure and the core PCE price index, which might still impact Fed policy expectations in the next few months.
A looming low interest rate environment might also prove beneficial for gold, as traders seek higher returns versus fixed income assets or less volatile price movements compared to currencies.
Price is hitting a ceiling at the channel top that lines up with the 61.8% Fibonacci retracement level around $2,035. If this is enough to keep gains in check, gold could fall back to the swing low at $1,985 near S2 ($1,984.66) or to the channel bottom closer to S3 ($1,968.96).
On the flip side, watch out for a move towards the next upside targets at R1 ($2,051.07) then R2 ($2,066.77) if the channel resistance breaks.
Technical indicators are looking a bit mixed, as the 100 SMA is below the 200 SMA to reflect bearish vibes while Stochastic still has some room to climb before reaching the overbought zone.
Which way do you think gold might go from here?