As per our previous recommendation dated April 16, 2013 to go Short on Spot Gold, the first target of $ 1302 has been achieved. In our opinion, profits on Short positions (as per our previous recommendation) should be booked at the current levels and fresh Short positions should be initiated on rallies. The price now faces immediate Support and the T2 $ 1155 (61.8% Fibonacci) level. The overall trend continues to look bearish below 50% trend line $ 1302. As such, a test of July 2010 low near the $1155 level looks possible in the medium-term.
After breaking the major support of $ 1302 (50% Fibonacci level) the price is currently holding way below it.
A breakdown of which occurred near $1302 level, and might now act as a resistance area for the price.
If the price continues to hold below the resistance zone at $ 1449 levels on a weekly closing basis, it has the potential to test the 61.8% Fibonacci support at $ 1155 level in a time span of 2-3 months. The RSI has broken strong horizontal support near the 40 mark and is currently pointing lower holding well below the same, which indicates medium-term bearish momentum.
Until the price breaches the resistance area of $ 1522, bullishness can be effectively ruled out. The strategy market will now wait for crucial levels to break for a convincing trend.
- Near Term: A sudden Pull back rally to $1359-1449 is most likely
- Medium Term: If the rally sustains above $1522, it will result in a reversal to bullish trend. The next target could be $1630 and $1795
- However, failure could see a continuation of the bearish trend in the form of sharp decline back to $ 1155, which is at 61.8% Fibonacci retracement levels.