After the bullish acceleration of yesterday, gold has stabilized and is currently testing the upper limit of its medium term bullish channel at 1,642 supporting the hypothesis of a decline. However, a break of these levels will release good potential and initiate a more violent bullish trend.
Technical indicators provide sell signal and approaching overbuy zone supporting a decline. Until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands are much discarded as a result of a strong increase these days. Stabilization is expected in short term. Furthermore, the upper band strengthens the upper limit of its channel supporting the hypothesis of a violent movement in case of failure.
As gold tests the upper limit of its channel, we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell at the level of 1,642 with the 1st objective at 1,632 and then at 1,630. A breakthrough 1,645 will invalidate this scenario. The second scenario is the hypothesis of a break of its resistance where we advise a “buy stop”. We recommend to buy the gold as soon as it is broken through its resistance of 1,642 with the 1st objective at 1,652 and then at 1,655. A breakthrough 1,639 will invalidate this scenario.