Gold rose to a new one-month high after extending a rally that started from the 1240 area on December 12. The bullish bias is strong in the short term but in the bigger picture, the precious metal remains in a range, essentially between key psychological levels of 1200 and 1300.
Risk is clearly tilted to the upside in the near term and the next target is 1300, which is seen to be a strong resistance level. It would likely be quite a challenge to break it. A failure to push higher from this barrier would see the market stuck in the broader consolidation range. Upside momentum may be fading since the stochastic and RSI are in or near overbought territory.
Any dip in price is expected to find support at 1270, which is where the 200-day moving average is located. Further support is seen at 1240 and a drop below this would open the way for a decline towards the July low of 1204.79.
Overall, bullish sentiment is expected to remain intact in the short term based on the bullish trend and momentum indicators. However, only a sustained break and move above 1300 would strengthen the bullish bias for a re-test of September’s peak of 1357.47. From here, gold could be on the path towards 1380.
