XAU/USD 7/9/11
Gold has dropped today as global equity markets rallied and a “risk on” sentiment prevailed. Our analysis yesterday called for a short term drop after a new record Gold price high was printed and the RSI 14 formed a divergence on the daily chart. The CME’s recent increase in Gold trading margins could also now be having some kind of impact on the price of Gold.
XAU/USD daily chart shows bearish RSI divergence
- Our longer term outlook is for further Gold gains in excess of $2000 if current market conditions persist. The increase in gold buying by private entities and central banks continues to drive price higher. A range-bound consolidation period would not be unusual at this stage though after the huge recent gains on XAU/USD.
- Price is currently located at the 50 % retrace of 1703.1 > 1920.8. This level is also aligned with the prominent 11/8/11 swing high and was our initial target in yesterdays Gold analysis post which stated “A correction to the 1815 area, which is the 50% retrace of 1702.67 > 1917.82 and is aligned with price structure support, may be seen in the near term”.
- The ascending trend line which held the last major drop is relatively close to the 61.8% retrace of 1703.1 > 1920.8. This technical area of confluence could see a reaction as Gold bulls look to rejoin the longer term trend to the upside.
- Today’s candle , with a range of 189% of the ADR, is however warning of further potential downside to come; this move represents a near 3% drop on the day and the largest drop in two weeks. A wait-and-see approach could be wise at this stage as these strong down days often see follow through.
Further analysis at http://www.forex-fx-4x.com
XAU/USD 4 hour chart
