Source: Bloomberg

Gold Daily Timeframe

Last week, gold prices breached above the $1300 per ounce psychological price level after a short 4-day consolidation of bullish hammer candlesticks. Many traders were surprised by how fast the price had risen. Within the week, gold prices had moved from a low of $1275.30 to a high of $1314.55, a drastic move of over 3%. Technical indicators are showing a strong bullish trend. Prices are holding well above the 200 day moving average, as well as showing a golden cross with the 50 day moving average crossing over the 200 day moving average. The short term up trend channel is still intact and the bulls are in control.

Fundamental signs also point to a bullish longer term outlook for gold. As uncertainties such as the US-China trade war, the Federal Reserve unwinding of its balance sheet, global economic slowdown and risks of recession cloud the year, investors see gold as a safe haven. Demand for gold then increases, which help to push prices higher. Amidst this backdrop, investors can look to accumulate gold on pull backs.

And recently, after such a strong rally, prices are nearing significant resistance levels. Breaching above the $1300 psychological level was a good sign; however selling pressure could enter as prices approach the strong resistance level of $1320, which might result in a pull back around that level.

Bullish scenario

If prices are able to sustain above the $1300 support level, the bullish sentiment remains intact. A subsequent break above the $1320 significant resistance level could signal further upside to the $1350 resistance target, and eventually the $1410 long term bullish target.

Bearish scenario

With a break below the $1300 support level, a retest of the $1280 support level is likely. If the bearish sentiment persists, short term support targets to watch are the $1263 and $1240 levels, along with the 50 and 100 day moving average supports.