Technical Analysis - Gold - Still consolidating recent gains but holding up well overall

William Adamswilliam.adams@fastmarkets.comHead of Research+44 (0)20 7264 2489

Short term:
Medium term:
Long term:

Resistances:
R1	1623 RL
R2	1653 Long-term DTL
R3	1671-1684 Series of highs
R4	1698
R5	1715

Support:
S1	1653 Long-term DTL
S2	1627-1641 Former highs
S3	1622 UTL
S4	1603-1609
S5	1584
S6	1554
S7	1532-1522 Triple bottom
S8	1478-1468

Stochastics:
Turns lower

Legend:
DTL = Downtrend line DMA = Daily moving average MACD = Moving average convergence divergence BB = Bollinger band RL = resistance line

Analysis

Gold's strong rebound after its break from the base triangle looks robust but, unsurprisingly, prices are now encountering some resistance from the series of mini-peaks from March and April that start at $1,671 and run up to $1,715.
Prices are, however, holding above the long-term DTL (green line), which is encouraging.
The stochastics remain negative, which suggests prices will continue to consolidate. But, with the MACD climbing still, we would not be surprised if any consolidation proved short-lived.
We have viewed the extended period of sideways-to-lower trading that followed last year's high as a period of consolidation following the rapid and long rally off the 2008 lows that ran from $682 to $1,921. After such a move, it is little wonder that the market took its time to consolidate.
Having the recent breakout, we are now waiting to see the degree to which sentiment has turned bullish.

Conclusion

We expect dips to be well supported - a move up above $1,677 would start to look interesting.

All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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