Gold's extreme rally tests 1200 psychological level
The precious metal’s rally over the past six weeks has seen one of the sharp gains that weren’t typical of an asset which has been repeatedly hammered by the bears. The pop in Gold prices this week saw prices testing the $1200 psychological barrier, and one which was achieved rather quickly. From our previous analysis, we set an initial target to 1154, based on the Cup and Handle pattern, but the gains made 1154 a rather conservative level in hindsight with absolutely no pullbacks either. This strong momentum led gains could, however, pose a risk of a strong reversal on the lack of any support levels being formed. It was not only Gold but Silver as well which surged strongly, testing the 15.4 resistance level in just under two weeks, after forming a base near 13.86.
Starting with the weekly chart for Gold, we notice a major resistance level near the 1200 - 1176 handle. Prices previously tested 1176 before falling lower to post new lows near 1040 -1050 levels. Overall, there is scope for Gold to form a potential longer term inverse head and shoulders pattern, if the resistance at 1200 holds from a weekly time frame. 1087 - 1090 levels look to be an ideal retracement if indeed Gold manages to pull back, forming a potentially bullish right shoulder. Of course, a breakout above 1176 - 1200 level would be required to follow up on such a scenario.
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