Despite an eventful week, gold continues to hold its $40 trading range recorded in the recent days. The precious metal seemed to remain at the mercy of the dollar dynamics as the markets reassess the Federal Reserve’s outlook on the US economic recovery; in the wake of the dismal jobless claims and housing data.
The Fed’s reluctance on extra stimulus probably caps the upside attempts that gold may have. Technically, the yellow metal seems to be clinging onto the 50-day Simple Moving Average (SMA). However, on September 18, 2020, gold appears to have rallied out of the sideways channel in the process claiming the volume cluster region.
Bulls are gradually taking control as price break the previous resistance now turning into support. Resistance is important at this moment and may give way to more bullish support. From there, possibly there could be a day trade into the closing but experts say that it will take some time to develop.
If gold prices manage to break the current resistance with a sustainable pull back, the fade might offer a chance to buy into the bullish trend. Thus, experts and analysts advise traders and investors to buy the dip.
Notably, gold faded in overnight trading losing 0.80% to settle around $1,944 per ounce. Like the equity and currency markets, the gold traders seem to have gone into the FOMC meeting long. We are now seeing a reduction in speculative long positioning.
Gold Key Levels To Watch
Based on the Technical Confluence tool, gold has held onto the critical $1945/43 support zone. That area is the confluence of Bollinger Band one-day Middle, Fibonacci 38.2% one-month, and SMA10 one-day. A break of the last may result in a probe of the weaker support levels located around $1,940 which is the convergence of Bollinger Band four-hour Lower and Fibonacci 23.6% one-day.
Going further down, the intersection of the previous day low and SMA50 one-day that is currently located at $1932 will be challenged. The next lower target is perched at $1929 which is the Fibonacci 61.8% one-week.
On the other hand, the precious metal seems to be battling the $1951/52 barrier at the time of writing. This zone is the confluence of the SMA5 one-day, Fibonacci 61.8% one-day, and SMA10 four-hour. The next soft capping zone appears at $1,955, the previous high on four-hour. Above that zone, the previous week’s high of $1,966 will get exposed.
Nevertheless, the bulls require a sustained break above the strong $1,969 barrier to validate a formidable bullish breakout from the recent trading range. This hurdle is the pivot point one-week R1.