- Gold makes recovery attempt after aggressive sell-off
- Technical signals welcome a bullish pivot but there is a wall at 2,600
Gold bounced up on Monday with scope to test the 2,600 round level after its two-week freefall paused near the constraining zone of 2,545.
The precious metal has retraced half of its record rally from June to October and signs of an oversold market are beginning to emerge, with the RSI and the stochastic oscillator currently looking for a pivot near 30 and 20 respectively.
However, for the bulls to encourage fresh buying they must first re-enter the broad bullish channel above 2,600, where the 38.2% Fibonacci mark is also placed. If their efforts prove successful, they could send the price toward the 50-day simple moving average (SMA) and the 23.6% Fibonacci of 2,672, while higher, they may attempt to cross the 2,750 border if the 2,700 area gives way.
In the bearish scenario, where the floor at 2,545 cracks, support could next come somewhere between the 61.8% Fibonacci of 2,483 and the restrictive line at 2,445. Failure to rotate there could see gold sinking toward the 200-day SMA for the first time in a year.
Overall, if the Elliot wave theory is still in play, the price might have entered a temporary corrective phase after completing its five bullish sub-waves (i-v).
Summing up, gold is currently displaying positive momentum, though to convince new buyers to enter the market in the short-term, it must first establish a strong foothold above 2,600. Until then the market may remain in a holding pattern.Â
