The yellow metal precious metal rallied sharply Monday as the dollar sold off, with a growing number of analysts suggesting Fed Chair Jereme Powell may decide against providing the roadmap for tapering. But with prices already recovery sharply over the course of the past couple of weeks, I wouldn’t be surprised if gold found some resistance around these levels ahead of Powell’s speech on Friday.
Source: ThinkMarkets and TradingView.com
In fact, gold was testing a key technical resistance zone at the time of writing. As per the daily chart, the area around $1805/10 is a significant because we have the bearish trend line converging with the 200-day average there. Thus, we may see a potential drop, not least on profit-taking, to the next support around $1795. However, if gold then continues to melt, and go on to take out Monday’s low at $1776, then that could trigger fresh technical selling.
Meanwhile, a clean break above $1805/10 resistance could pave the way for a move towards the next resistance circa $1830.
So, overall, gold may be shining but it is not out of the woods just yet.
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