Gold prices are testing the key 1280 level but it appears unlikely that gains can be sustained above it. The recent bounce higher may be short-lived as the RSI on the 4-hour chart is turning back down, indicating a loss of upside momentum.
Gold’s rise above the 50-period moving average helped ease downside pressure. But it remains to be seen whether the current move is merely a pause in the downtrend that has been taking place since the September 8 high of 1357.47.
Gains have stalled at 1285.42, suggesting a short-term top here, with increased odds for a drop towards the October 6 low of 1260.59. From here, support is expected at 1251.49 (August 8 low). A break below this level would increase weakness in the market that would bring the 1200 area into sight.
If prices can remain above 1280 there could be a push higher towards the key psychological level at 1300. A move above 1315 resistance would improve the chance for another leg higher to the September 15 high of 1334.26. A break of this resistance sees the potential for further gains towards the 1357.47 peak and then a likely resumption of the uptrend that started from the July low of 1204.79.
The bearish phase from 1357.47 is still in progress unless prices rise above 1300. The negative alignment and downward-sloping 20 and 50-period moving averages point to a bearish bias. Consolidation around 1280 is expected in the near-term.
