On September 4th gold hit the 1557 level, but failed to move higher after that and reversed back south. Since then, the commodity keeps on drifting lower within a short-term falling channel. As long as the upper side of that channel remains intact, we will continue targeting the downside, at least in the short run.
That said, in order to get slightly more comfortable with the downside, we would like to see price sliding below the 1487 zone, marked by yesterday’s low. This could lead to more sellers joining in and sending the price back to the 1474 hurdle, marked by the low of October 2nd. The precious metal might stall there initially, but if there are not enough buyers in sight, a further slide may bring the commodity below the 1474 area and test the 1459 level, which is the low of last week. Further down below that level sits the lower side of the aforementioned channel, which could help keep gold from moving lower.
Looking at our oscillators, the RSI and the MACD, they are slightly contradicting one another. The RSI, although just fractionally above 50, is now pointing to the downside. The MACD is just slightly above zero and its trigger line, but remains somewhat flat. This is why we will not put too much emphasis on them and instead, keep an eye on our support and resistance barriers.
Alternatively, a break of the upper side of the downside channel, would signal a change in the short-term term trend, especially if the price climbs above the 1520 mark, which is near high of October 3rd. This way more buyers may see this as a good opportunity to step in and let gold travel higher towards the next possible resistance area, at 1536, a break of which could set the stage for a move to the 1557, marked by the highest point of September.
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