Gold – Awaiting Breakout from a Short-term Consolidation Range

Gold Technical Update

XAU/USD 1H chart 5/3/2013 11:20AM EDT

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Consolidation: The 1H gold chart is showing a market that is trading in a consolidation range after a relief rally from the 1321.53 2013 low. The range is roughly between 1485 and 1440. As price remains above an upward sloping 200-hour SMA, there is still some short-term bullish bias. During the 5/3 US session, positive US jobs data held the range hold structure after gold fell after briefly breaching resistance. Still, bullish bias in the short-term remains.

Scenarios: A hold of price above the 200-hour SMA and the 1H RSI above 40 would maintain a short-term bullish bias. In this short-term bullish scenario, there is upside risk to 1500, then the previously key support area just above 1520.

If there is a failure to break above 1490, then a break below 1435 would complete a double top and might open up a bearish outlook. Then a pullback should NOT come back above the central pivot of the “top” which is in the  1460s area.

Pullback: In the daily chart, you can see that the 1500 area is also around 38.2% retracement so a if the market breaks above the current consolidation, watch out for the 1500-1520 area to provide at least the first wave of resistance. Note that even though we had a very strong sell off since Oct. 2012, the daily chart shows a market without a trend as the 200-day SMA is flat. But if price can now start to stay under the 200-day SMA, a bearish trend could be in development. Otherwise, look for range-bound market with tendency to revert back to the 200-day SMA.

XAU/USD Daily chart 5/3/2013 11:25AM EDT

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Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

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