GOLD seems to be consolidating in a $20 range for the last few days. However, the precious metal is now forming a pattern on the hourly chart, which could lead to a break lower or higher in the coming days. The most important thing is the trigger. GOLD traders are waiting for a reason to make a substantial move.
We have the FOMC meeting minutes lined up during this week, which can act as a catalyst for the yellow metal prices in the short term. So, we need to wait for the right time and analyse the price action carefully before jumping into a trade.
Technically, there is a trend line forming on the hourly chart for GOLD. This trend line holds a lot of importance, as it represents a crucial confluence zone of the 200 hourly simple moving average (SMA), 100 hourly SMA and 50% fib retracement level of the last drop from the $1331 high to $1309 low.
So, if the prices break above the mentioned confluence area, then it might go back towards the last high and even break it to trade higher. So, buying with the break might not be a bad deal in the short term.
Alternatively, if GOLD fails to break the mentioned confluence area and turns lower, then it might head back towards a bullish trend line which is preceding from the $1306 low.
If it breaks the trend line and support area, then a re-test of $1306 is possible. In that situation, buyers will be tested and if they fail, then a break below the mentioned level might take GOLD towards the $1280 level.
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Posted By Simon Ji of IKOFXÂ
