Gold bulls took over again on Tuesday, driving the price near Friday’s 14-month high of 1,358. The location of the RSI – above 70 – hints that the bullish action may be overdone, and therefore no space is left for additional upside. However, with the Stochastics trending under the 80 oversold level and the MACD strengthening momentum above its red signal line, the market may see further improvement before potentially reversing lower.
The 1,356-1,365 area is the next target, while slightly higher the 2016 peak of 1,375 could also play a key role for the rally to continue until the 1,400 psychological number.
In the negative scenario, the bears would try to clear the 1,340-1,320 zone to reach the 1,300 round level. A closing price below the 61.8% Fibonacci of 1,284 of the donwleg from 1,3750 to 1,122 would shift the spotlight towards the 200-day simple moving average (SMA) currently at 1,268.
Turning to the medium-term picture, gold could officially claim a bullish outlook if it manages to climb above the 1,356-1,365 region. The positive slope in the 50-day SMA, which deviates above the 200-day SMA, increases the likelihood of such a situation occurring.
In brief, the short-term risk is currently viewed cautiously positive. Gold is awaiting a bounce above 1,356-1,365 to resume bullish profile.