Gold managed to close in the green for the first time after three weeks following the creation of a bullish hammer near a four-month low of 1,764 and the bounce back above its 200-day simple moving average (SMA).
The recent row of bullish candles, however, appears to be an upside correction in the downward pattern that started from the record high of 2,079, while the bearish cross within the 20- and 50-day SMAs and the narrowing distance between the 20- and 200-day SMAs remain a negative trend warning.
Technical signals from momentum indicators are also questioning the strength in the price. The RSI seems to be losing steam below its 50 neutral mark after forcefully rebounding from the oversold area, whilst the stochastics are set for a bearish cross above their 80 overbought mark.
A decisive close above the restrictive 20-day SMA and the 23.6% Fibonacci of the 2,079 – 1,764 downleg at 1,837 could generate additional gains towards the 38.2% Fibonacci of 1,883. A steeper increase could bring the 50% Fibonacci of 1,920 next into view, though only a rally above the 61.8% Fibonacci of 1,956 would eliminate fears of a down-trending market.
In the event sellers pressure the price below the 200-day SMA and the red Tenkan-sen line currently around 1,800, the door would open for the 1,764 trough. A break lower and beneath the 1,745 barrier could extend towards the 1,715 level – that being the 161.8% Fibonacci extension of the latest bullish action.
Summarizing, the previous metal has recouped some lost ground, though the bearish risks regarding the price momentum and the market trend remain well intact unless the price jumps above 1,956.
