Gold Technicals: Bullish Recovery Hits A Snag

Gold prices received a surprising boost during Asian trade, with prices breaking the 1,232 ceiling that has been keeping bulls in checked for the past 2 days. It is likely that the risk off sentiment which has pushed Asian stocks lower fuelled the gain in Gold as traders seek safe assets for shelter. However, a large part of today's gain may actually be driven by technicals instead. This is because Gold prices continued to rally and managed to hit the former support turned resistance around 1,237.5 despite risk appetite improving during the latter part of Asian trading session. Nikkei 225 managed to reverse a more than 100 point loss to end up almost 32 points higher, while the same could be said of Hang Seng and Straits Times Index, all of which did start off bearishly but are now no longer in the red.

Hourly Chart

Seeing how price is facing resistance from the combine resistance of 1,237.5 and Channel Top, it is clear that technical pressure is stronger than risk trends right now. Given that Stochastic readings are currently within Oversold region and are showing signs of peaking, a move towards Channel Bottom is favoured.

Today's NFP announcement will definitely create volatility which may allow prices to break above 1,237.5 if NFP numbers are worse than expected. However, it is unlikely that price will be able to overcome the ceiling that has been in play on Monday and Tuesday, not to mention the 1,250 round figure resistance just slightly above as price reaction post hawkish FOMC minutes have been mute. As such a weaker than expected NFP number may not trigger relief from so taper fears, as market appears to be insensitive to future tapering knowing that QE will eventually end.

Daily Chart

Daily Chart is bearish, but Stochastic readings appears to be bottoming out, and opens up 1,250 and confluence with descending Channel Top as a potential bullish target. However, given the divergence between Stoch peaks and price peaks, bullish signals must be taken with a huge pinch of salt, and what we're seeing from Stochastic could simply be an interim turning point and not an indication of a proper bullish cycle.

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