Yahoo Finance Gold finally breaks the crucial resistance
I will start this analysis by telling you that in the past few months, the movements on Gold are a bit, let’s say weird. Gold does not behave as it was for the past few years. The correlation between the USD and the risk ON/OFF mode seems broken. Gold follows it’s own path. Luckily, the technical analysis works in any condition and this is the place, where we will focus now.
For the past few weeks, Gold had only one crucial resistance and it was the 38,2% Fibonacci of the main downtrend. 38,2% finally got broken. Does it mean that we do have a switch in the long-term sentiment on the Gold? Unfortunately for the buyers, not. The long-term sentiment remains negative and lets me explain you why. First of all, we are still inside the mid-term flag formation (black lines).
The flag is a trend continuation pattern and it was created after a deep drop, so it promotes a drop too. Currently, the price is bouncing from the upper line of this formation, which only confirms this pattern and my previous sentence. Yes, the breakout of the 38,2% is a crucial development in the mid-term but does not change the big picture.
In my opinion, we can start being optimistic only after the breakout of the upper line of the flag or after the breakout of the 50% Fibonacci. I think that the current scenario is the price testing the 38,2% from the top, in other words: short-term drop followed by a mid-term upswing.
This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis
This article was originally posted on FX Empire
