Gold market analysis

Gold price remains range-bound in the medium term 12/8 09:45am
Gold price continued to decline as expected yesterday, hitting a low of below $3,342. However, the support at $3,340 was strong, and the price rebounded after multiple tests of this level towards the end of the New York trading session. From the daily chart, it is evident that gold price has once again encountered strong resistance above $3,400. This is the fifth time since it reached a historical high of $3,500 in April that it has been clearly blocked and retreated above $3,400. Even if bulls still hold hope, they must wait for a break above $3,500 before considering following the trend. Otherwise, the gold price is likely to remain range-bound between $3,200 and $3,400. 

The current market is in a triangle formation waiting to be broken. 

Yesterday, the spot gold price closed at $3,349, slightly below the 50-day SMA ($3,349.6). This morning, it has climbed above $3,355. If the 50-day SMA once again serves as support, the gold price may develop into a narrowing triangle pattern within the day or in the short term. As yesterday's high and low points touched the ascending and descending tracks of the triangle respectively, before a breakthrough occurs, the gold price is likely to fluctuate between $3,340 and $3,405 in the short term. Observing the gold price's movement since it reached a new high of $3,500 in April this year, it has mainly fluctuated between a 21.4% correction ($3,419) and a 61.8% correction ($3,265). Currently, it is hovering around the 38.2% correction level ($3,355). If the gold price closes above $3,419 or below $3,265, it will be seen as a warning sign of a potential breakthrough; otherwise, it will remain in a sideways state. 

The intraday rebound is expected to be capped at $3,375. 

From the hourly chart, the gold price shows a small round bottom pattern. $3,358 can be regarded as resistance. If the hourly chart closes above this level, the upward target is $3,374.35, which is close to half of the maximum decline since yesterday, that is, $3,375.3. Therefore, an upward breakthrough is also expected to be constrained by this level. If it breaks down, support is estimated to be at $3,322. From the daily chart, if the gold price breaks above the descending triangle's lower trendline, the measured upward target is approximately $3,558. Conversely, if it breaks below the upper trendline, the measured downward target is about $3,285. However, I expect the gold price to remain weak for the most part this week. As the gold price closed with a large bearish candle yesterday and the closing price has approached the upper trendline, even if it breaks below the upper trendline today, it is temporarily regarded as a false breakout. The upward and downward targets mentioned above are calculated based on the support of the upper trendline and the resistance of the lower trendline extended to tomorrow. 

The above content is for reference only and does not constitute investment advice. 

MTF Special Analyst Zheng Guangfu