Gold is bullish both in the short and medium-term and has approached its highest level since September 2016 at 1339.64. The broader undertone remains strong and there is little sign that the uptrend will change in the near term.
However, the short-term momentum oscillators are indicating the market has reached overbought levels.
Following a jump higher above the key 1330 level today, RSI rose above 70 and the stochastic is above 80, both indicating an overbought market. (4-hour chart)
The odds are high for a pause in the uptrend and for prices to begin a consolidation phase with strong immediate support at 1330 and resistance at 1340. A break below 1330 would target the September 1 low at 1316.37 ahead of key support at 1300. Below this psychological level, a dip lower to 1280 is likely. From here the outlook would turn more bearish for gold to slip towards 1251.49. Then an extension to 1204.79 cannot be ruled out for a complete reversal of the uptrend from the July 10 low.
A sustained break above 1340 on the 4-hour chart would trigger a rally to 1352.57, which was a high from a year ago in September 2016. Such a move would strengthen the underlying uptrend with scope for another leg higher to the next major peak at 1375.
The short-term picture is bullish based on the positive alignment of the moving averages on the 4-hour chart. The 20 SMA has crossed above the 50 SMA. Meanwhile, the medium-term outlook is also bullish with the uptrend from 1204 still intact.
