Gold has tested the upper limit of its medium term bullish channel at 1,678 and declined. It approaches now the intermediate support of this one at 1,647 suggesting a rebound. However, a break of these levels will release large potential and reach the lower limit of its channel at 1,575.
Technical indicators provide sell signals and evolve in overbuy zone supporting the assumption of a decline. Bollinger bands are much discarded as a result of a strong increase of these days. Stabilization is expected in a short term. Furthermore, the superior band strengthens the upper limit of its channel supporting the hypothesis of a violent movement in case of failure.
As gold tests its intermediate support, we recommend 2 scenarios: the first one is the hypothesis of a rebound where we advise buying at the level of 1,647 with the 1st objective at 1,657 and then at 1,660. A breakthrough of 1,644 will invalidate this scenario. The second scenario is a break of its support where we suggest a “sell stop” which means selling the spot rate as soon as it is broken through its support of 1,647 with the 1st objective at 1,637 and then at 1,635. A breakthrough of 1,650 will invalidate this scenario.