Surge to new high and quick pullback suggest that larger bulls may take a breather
Spot gold price spiked to new seven-year high at $1611 in Asia on Wednesday after Iran’s rocket attack sparked strong risk safe-haven buying in the market, but gains were short-lived as situation stabilized after America’s mild reaction.
Renewed risk appetite on fading fears on conflict escalation brought gold price to the levels before the rally and forming daily Doji candle with very long upper shadow.
This could be seen as initial signal of stall, with the notion being supported by stochastic indicator forming bearish divergence and reversing from overbought territory; overextended momentum turning sideways and strongly overbought RSI also being flat.
Today’s spike cracked important barriers at $1586 (Fibo 61.8% of $1920/$1046) and $1600 (psychological) but failure to close above would suggest that the price action faces strong headwinds and may enter consolidation before larger bulls resume.
Solid support at $1557/54 (former high of 4 Sep / rising daily Tenkan-sen) should contain extended dips and keep bulls intact.
Final break higher would expose targets at $1700 zone (highs of Feb/Jan 2013 / psychological / Fibo 76.4%).
Traders will closely watch the situation in the Middle-East, but will also focus on Fed speakers on Thursday, which may provide fresh signals about central bank’s next steps.
Res: 1586; 1600; 1611; 1630
Sup: 1568; 1557; 1554; 1535