Gold bounced off on the lower limit of its medium term bullish channel and tests now the upper limit of its short term trading range at 1,780 and seems to decline. However, a break of these levels will free a large potential and reach the intermediate resistance of its medium term channel.

Technical indicators provide sell signals and 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, the superior band evolves on the levels of the upper limit of the trading range supporting the assumption of a violent movement in case of failure.

As gold is currently testing the upper limit of its trading range, we suggest 2 scenarios: the first one is the hypothesis of a decline then we recommend a sell at the level of 1,780 with the 1st objective at 1,770 and then at 1,765. A breakthrough of 1,783 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” which means buying the gold as soon as it is broken through its resistance of 1,780 with the 1st objective at 1,790 and then at 1,795. A breakthrough of 1,777 will invalidate this scenario.