Just when it looked like gold prices were about to slump again, buyers drove the price of gold sharply higher on Monday, just ahead of a major support level.
Gold prices were under pressure in the first week of the month but the downside momentum has subsided quite a bit in the last seven sessions or so. Sellers seem to have hesitated after a test of support around $1450.
In an earlier article, I outlined two levels of resistance that I’ve had my eye on in the event of a recovery. The first at $1472 and second in an area between $1480 and $1486.
The $1472 price point marks the lowest daily close in September. So far, on a daily chart, this level has capped gains over the past four sessions.
But I do think there is some potential for another push higher.
What I’m looking at specifically is the upward momentum in the rally that happened in the North American session yesterday. This is well above the norm as you can see in the size of the candles before it.
Not only that, a higher high was made, albeit a marginal one.
Yesterday, the reversal higher happened after a test of the 61.8% Fibonacci retracement measured from this month’s low to the high posted last week. I think this ($1456) is a near-term line in the sand for the yellow metal.
While above it, I think there is potential for another push higher into the $1480-$1486 resistance zone.
For the session ahead, I’m looking at a horizontal level at $1463. I think this is a level that could potentially draw buyers once again. The level carries some confluence with a rising trendline drawn from the November 12 low.
The 4-hour chart shows just how important resistance at $1472 has been. This will remain a big hurdle for a potential move to the previously mentioned resistance zone.
If we drop below the support highlighted on a 4-hour chart, that might provide an early signal that the yellow metal is resuming within the downtrend that started in September.
For now, gold has not shown any meaningful signs of bottoming but I do see some potential for the current recovery to extend a bit higher. But to be clear, we probably need to see a push above $1520 before starting to consider that the current 10-week correction has completed.