Gold has been losing ground since early March, generating a profound structure of lower highs and lower lows within a descending channel. However, in the previous daily session, bullion managed to profoundly cross above its restrictive trendline before the 50-day simple moving average (SMA) capped its upside.
The momentum indicators currently suggest that bullish forces are strengthening. Specifically, the RSI has jumped above its 50-neutral mark, while the stochastic oscillator is ascending after bouncing at its 20-oversold level.
To the upside, bullish actions could propel the price towards 1,688, which has acted as both support and resistance in the past two months. Conquering this barricade, the bulls could aim for the October high of 1,730. Piercing through this region, gold may ascend towards 1,765 or higher to test the August high of 1,807.
Alternatively, if the positive momentum wanes, initial support could be met at the 1,653 level. A violation of this zone could open the door for the 30-month low of 1,614. Failing to halt there, the price could descend to form fresh multi-month lows, where the April 2020 support of 1,566 might provide downside protection.
In brief, gold appears to be in recovery mode after managing to break above its long-term descending channel. Nevertheless, if the price falls again below the latter, the precious metal will most likely extend its downtrend.