As we predicted yesterday, the gold broke the upper limit of its medium term bullish channel and initiated a more violent medium term bullish channel. It tests now the upper limit of this one at 1,671. A break of these levels will release good potential and initiate a more violent bullish channel.
Technical indicators provide buy signal but approach overbuy zone supporting a decline and until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands are much discarded as a result of a strong increase these days. Stabilization is expected in a short term. Furthermore, the gold broke the superior band supporting the hypothesis of a break of its resistance.
As gold tests the upper limit of its channel, we suggest 2 scenarios: the first one is the hypothesis of a decline where we recommend selling on the level of 1,671 with the 1st objective at 1,660 and then at 1,657. A breakthrough of 1,674 will invalidate this scenario. The second scenario is the hypothesis of a break of its resistance where we advise a “buy stop”. We recommend to buy the gold as soon as it is broken through its resistance of 1,671 with the 1st objective at 1,682 and then at 1,685. A breakthrough of 1,668 will invalidate this scenario.