Key Points:
- Gold volatile ahead of Presidential election result.
- Price action nearing a key reversal zone.
- Price action currently supported by 200 Day MA.
The past week has been a roller coaster within the U.S. Presidential election cycle and Gold prices have seen significant selling pressure as the uncertainty over the next candidate-elect increases. Subsequently, the precious metal has fallen sharply as the spectre of a potential Trump win saw prices melt towards $1271.15. However, the commodity is reaching the bottom of the current wedge formation which is an area that could potentially see it rally in the ensuring days.
A cursory review of the technical indicators provides some interesting hints as to what is potentially to come. In particular, the RSI Oscillator on the 4-hour chart is entering oversold territory which may be indicative of the need for a retracement of the previous falls. The Stochastic Oscillator is also strongly within reversal territory, largely mirroring RSI’s direction.
In addition, a reversal zone around the $1261 mark is also looming and may come into play in the latter part of today’s session if the election volatility continues. This point of reference is also relatively close to the bottom of the current wedge formation and is therefore highly relevant. Subsequently, there is every reason to see Gold discovering a bottom for the current slide around this level.
Lending further support to the bullish contention is the fact that price action still remains fractionally above the 200-Day moving average which appears to be providing Gold some much needed support. Also, although the 50 and 100-Day EMA’s have declined slightly they still remain relatively flat despite the recent pullback. It is therefore relatively probable that we will witness a bounce from this depressed level once the election volatility smooths out and we regain some market certainty.
In fact, the ideal scenario would see Gold regain its short term bullish bias and mount a challenge to resistance within the $1280 region and then surmount the $1300 handle in extension. However, regardless of the technical indicators, the election result will need to shake itself loose first and the market will need to come to terms with the chosen candidate regardless of their imperfections.
Ultimately, Gold is likely to remain volatile in the days ahead but the downside will be relatively limited and the precious metal should return to some form of stability in the latter part of the week. At that point, the focus will return to the lack of robustness within the recent U.S. economic indicators and Gold should again start to rise.