Gold Heading Towards 38.2% Retracement Level, Critical Support Ahead
Dwayne Buzzell | Nov 22, 2017 04:40AM ET
There has been a significant rally in the price of gold after it hit the critical support level at 1121.439.The bulls managed to push the price higher in the global market for 8th consecutive months. The recent bullish rally in gold market faced an extreme level of bearish pressure after it hit the critical resistance level at 1357.00. The bearish pressure intensified in the global market after the decent recovery attempt in the U.S labor field. Though the recent performance of the U.S economy is not up to the market yet the optimistic dollar bulls are expecting a rate hike in the month of December. If the FED manages to come up with hawkish hike prior to the closing of the year 2017 then the gold bears will start dominating the market. Though rate hike in the month of December is a done deal investors are eyeing on the project rate hike for the year 2018.
Gold market weekly chart analysis
Figure: Gold price heading towards the 38.2% Fibonacci retracement level
From the above figure, you can clearly see that the price of gold is currently heading towards the 38.2% Fibonacci retracement level. Though we had multiple tests of the critical support level at 1268.53 most of the leading investors in Dubai expecting a strong rejection of that support level. If the bulls manage to take control of the price from that level then the first initial bullish target for the gold would be critical resistance level at 1306.39.At that level, the bears might try to take control of this market but a daily closing of the price above 1306.39 will confirm another bullish rally in the price of gold. On the downside, a clear break of the 38.2% Fibonacci retracement level will lead the price of gold towards the 50% retracement level. This level is going to provide a significant amount of buying pressure since the 100 and 200 weekly SMA coincides with this level. In order to turn the initial bias bearish, the price must breach the low of 10th March 2017.
In the upcoming week, we have scheduled FOMC meeting on Thursday which is most likely to create an extreme level of volatility in the gold market. Though the optimistic dollars bulls will expect a hawkish statement from the FED chairperson Janet Yellen, trimming of the current U.S balance sheet is also going to be another major issue. If the U.S central bank manages to trim their current balance sheet then adjusting the current inflation rate problem will be a lot easier. On the contrary, the pending tax cut policy is also imposing a negative sentiment among the U.S consumers. Since we have U.S Unemployment Claims data release prior to the FOMC statement, the leading investors will give a great deal emphasize on the actual number of the news release. If the data manages to beat the expectation of the consumers then a hawkish statement is the most expected scenario from Janet Yellen.
Get The News You Want
Gold daily chart analysis
Figure: Gold price trading near the strong support region
On the daily chart, the price of gold has currently breached the 100 days SMA and moving forwards towards the 200 SMA supported by the 38.2% Fibonacci retracement level. Since we have plenty of supportive candle near the critical support level at 1269.90, any bullish price action confirmation signal will be good to execute long orders. On the contrary, a clear break of the 200 days SMA will ultimately lead this pair towards the 61.8% Fibonacci retracement level. At that level, we might see some decent bullish bounce in the price of gold but executing long orders at that level will be an immature act. Considering the technical and fundamental factors of the gold market it’s better to keep on close eye on the 38.2% Fibonacci retracement level to find any bullish price action signal for long trade setup.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.