Gold broke yesterday the intermediate resistance if its medium term bearish channel leading to a violent acceleration. It approaches now the upper limit of this one at 1,625 suggesting a decline. However, a break of these levels will release good potential and initiate a violent bullish trend.
Technical indicators provide sell signals but until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands have greatly tightened in recent days showing a decline in volatility and the imminence of a violent movement. Furthermore, superior band strengthens the upper limit of its channel supporting the assumption of a violent movement in case of break.
The spot rate tests the intermediate resistance of its channel that is why we recommend 2 scenarios: The first one is the hypothesis of a decline where we suggest a sell on the level of 1,625 with the 1st objective at 1,615 and then at 1,610. A breakthrough 1,628 will invalidate this scenario. The second scenario is the hypothesis of a break of its resistance and we recommend a “buy stop”. We advise to buy the spot rate as soon as it is broken through its resistance of 1,625 with the 1st objective at 1,635 and then at 1,640. A breakthrough 1,622 will invalidate this scenario.