Gold Technicals: Strong Bearish Influence

Gold prices remained steady for the past 60 hours, trading mostly between 1,237 - 1,245. Prices just stayed flat despite bearish risk trends yesterday even though a clear bearish response was made when risk trends were positive on Wednesday. Similarly, "risk off" sentiments during Asian trade today did not really trigger a great response in Gold, suggesting that prices is much more sensitive to bearish drivers as compared to bullish ones.

Hourly Chart

This discrepancy between bullish/bearish factors is an indication that the underlying sentiment of Gold is actually bearish. Certainly there are good fundamental reasons why Gold prices should be heading lower (e.g. certainty of end of QE), but there are good technical reasons for the inherent bearishness right now.

Firstly, price has traded below 1,245 support and below the rising trendline. The reason price managed to stay sideways was due to the 1,238 support which has been tested twice since with prices managing to push lower beyond the support level on both occasions. On the other hand, the bullish rebound off 1,238 only managed to test 1,245 once, and that singular attempt did not last long either, with prices quickly reverting back lower - highlighting once again the inherent bearishness that is at play currently.

With this in mind, the likelihood of a 1,245 break today is not very likely, and given that global risk trends appears to be improving with Asian stocks improving in the afternoon trade and European bourses opening higher. If prices continue to be more sensitive towards bearish factors, a push towards 1,238 is possible. Stochastic readings agree with Stoch/Signal curves both pointing lower - giving a bearish cycle signal. That however does not guarantee that prices will be able to break 1,238.

Daily Chart remains bearish, with Channel Top providing further bearish pressure that opens up Channel Bottom as a viable bearish target. However, strong bearish conviction will only likely emerge should Stochastic readings push below 75.0 "support", which will most likely line up with prices breaking the 1,238 level. Given that 1,238 (and all the way to 1,235 if we are generous) holds such importance, expect bulls to defend it. This is especially true as we've seen unknown large buyers of Gold previously. On the flip side, if we see 1,238 being overcame quickly, we may see very quick bearish acceleration towards 2013 lows and Channel Bottom subsequently as this would mean that bulls are extremely weak, and bears may be able to walk over them.

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