By Usman Ahmed
Gold extended upside movement on Monday, increasing the price of yellow metal to more than $1150 an ounce during thin volume trading. The precious metal has rallied considerably during last few days as bulls seem to gain strength. A nice doji on the weekly timeframe hints at potential bullish reversal in the bullion’s price. A sustained upside movement from the current levels shall validate a move towards the $1375 level in long term – because of a higher low and a potential higher high.
As of this writing, the precious metal is being traded around $1152 an ounce. A hurdle may be seen around $1156, the horizontal resistance area ahead of $1200, the confluence of psychological number as well as horizontal resistance as demonstrated in the given below weekly chart. A break and daily closing above the $1200 resistance area shall incite renewed buying interest, validating a move towards $1240 and then $1375 in long term.
On the downside, the yellow metal is likely to find a support around $1142, the short term horizontal support level ahead of $1100, the psychological number and then $1046, the swing low of the last major downside move. The technical bias shall remain bullish as long as the $1046 support area is intact.
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Fed Monetary Policy Outlook
The Federal Reserve increased its benchmark interest rate last month and signaled at least three more hikes in 2017 – more than previous expectations. So with this kind of hawkish monetary policy outlook from the Federal Reserve we might accept a bit slower pace of upside rallies in gold but the current long term outlook for the yellow metal remains bullish as we described above. The precious metal has to break the $1046 support area in order to turn our bias to bearish.
Considering the overall technical and fundamental outlook, buying the precious metal on dips appears to be a good strategy. $1142 may be a good entry level for long trades in short to medium term.
The analysis is written by Usman Ahmed. He is an individual Forex Trader and Market Analyst at Investoo.