Gold kicked off the new year spectacularly, opening with a positive gap on Monday and up by more than 1.0% to finally pierce the 1,900 level.
More interestingly, the price has jumped above the four-month old descending channel and flew beyond the Ichimoku Cloud, bringing the bulls back into play. The momentum indicators are also reflecting the growing buying appetite in the market as the RSI is printing new highs above its 50 neutral mark and the MACD is rising at a stronger pace above its red signal line.
The 50% Fibonacci of the 2,079 – 1,764 downfall is currently in the spotlight around 1,920 and should it give the green light, the price may gear up to the 1,956 – 1,975 restrictive area formed by the 61.8% Fibonacci and August’s resistance zone. The latter may gather special attention as any significant breakout at this point would violate the downward pattern from the top of 2,079, likely triggering a fresh bullish wave towards the key 2,015 number.
On the downside, there is a strong floor between the intersection of the trendlines, the 38.2% Fibonacci of 1,883, and the shorter-term simple moving averages (SMAs) at 1,870, which needs to hold to keep sentiment positive. Should it collapse, the sell-off may get new legs towards the 23.6% Fibonacci of 1,837 and the 200-day SMA. A step lower from here would resume confidence in the existing downtrend.
Summarizing, gold, although in a downtrend, is sending recovery short-term signals after infracting a bearish formation. A decisive close above 1,920 is expected to see another extension towards the 1,956 – 1,975 region in the short term.
