Gold rose for the fifth consecutive trading session, coming close to testing a critical technical and psychological level near $1800. The bears are in no hurry to give up, foiling attempts by Gold and other precious metals to accelerate their growth. Also worth considering are headwinds such as a global monetary policy reversal.
For the third Friday in a row, sellers entered the gold market, forming a pullback at the close of the week. This is often seen as a rather negative signal from market professionals.
However, the hardest part of the bulls’ work is ahead. The Gold closed the last week around the 200 SMA without being dominated by either side.
In the region of $1800-1810, the Gold was near the upper boundary of the downtrend. The bears have fiercely resisted attempts to break this trend since June. And now we see another attack of bulls.
Thus, cautious traders might prefer to see the following two signals first before betting on an increase in the price.
The first is the consolidation above the 200 SMA, where the Gold has to hold for a couple of days before confirming this bullish signal.
The second is the confirmation of the downtrend break-down, which will occur if the price crosses the levels of the previous reversal, i.e., above $1830.
Among the fundamental factors against Gold, rising global interest rates are often cited. But the latest jump in yields is caused by fears of accelerating inflation, and central bankers are behind the curve here.
Silver price-performance gives additional bullish signals, which broke out of a dull sidewall at the beginning of the month. In addition, gold and silver mining stocks have received sustained support since late September, indicating that long-term investors have considered the bearish rally in the sector over.
On previous occasions, in 2018 and 2013, buying in gold miners on heavy volumes was a signal of a return of the bullish trend. However, again, it would still be prudent for traders to wait for the results of a test of significant levels in Gold to determine whether we see a bounce on the way down or a break of the bearish trend.
