Will Gold Turn Down Again?

XAU/USD has been on a recovery mode since September 30^th, when it hit support at 1721. However, overall, the price structure remains of lower highs below the downside resistance line taken from the high of August 6^th last year, and thus, we would consider the broader outlook to be cautiously negative.

The current recovery may continue for a while more, but the bears may take charge again from near the high of September 22^nd, at 1787. They could push the action back towards the 1721 barrier, the break of which could allow declines towards the 1683 territory, which has been acting as a floor since March 7^th.

Our daily oscillators detect slowing downside speed an support the notion for some further recovery in the yellow metal before the next leg south. The RSI rebounded from slightly above 30 and now rests flat fractionally below 50, while the MACD, although negative, lies above its trigger line.

In order to abandon the bearish case and start examining the bullish one, we would like to see a strong recovery above the 1857 barrier, marked by the inside swing low of June 4^th. This may also confirm the break above the downside line taken from the high of August 6^th last year. We could then see advances towards 1903, the high of June 11^th, or towards the peak of June 1^st, at 1917. If neither barrier is able to stop the bulls, then we could experience extensions towards the high of January 6^th, at 1959.

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