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Gold Neutral After Rejection At Strong 1300 Resistance

Gold has been in an uptrend since the July 10 low of 1204.79, with the market making higher highs and higher lows. After reaching the key psychological level at 1300.00, upside momentum faded. Following a spike to a nine-month high of 1300.77 on August 18, prices fell back as RSI reached overbought levels at 70.

Looking at the 4-hour chart, the market is expected to consolidate above 1280.00 in the near term. The short- term outlook should remain bullish as long as this key support level holds. A break of this level would favour a move to the downside. Gold prices would extend lower towards the mid-August low of 1267.25. This is a key level since it is near the 50% Fibonacci retracement level of the rise from 1204.79 to 1300.77. A deeper fall from here would weaken the short term bullish picture and could open the way for a re-test of the 1204.79 low.

Alternatively, sustained trading above the 50-period moving average would help keep focus to the upside. A successful break of the key 1300.00 level and August 18 peak would bring a resumption in the uptrend with scope to target the next major high of 1337.24.

If there is another rejection at key resistance in the 1300.00 area, the most likely scenario would be a consolidation phase in the near-term, with 1280.00 support keeping the uptrend intact. The rising and positively-aligned moving averages (20 and 50-period SMA) highlight a bullish market structure. In the bigger picture, gold has been neutral since April (on the daily chart).

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