Gold price have taken a beating in recent weeks, weighed down by resilient economic data, positive vaccine results and the start of the US presidential transition process.

However, this correction lower may prove short-lived as longer-term price analysis suggests a reversal higher could be in the offing.

GOLD PRICES WEEKLY CHART – CUP AND HANDLE IN PLAY?


Gold prices have continued to track lower after failing to gain a firm foothold above key psychological resistance at the 2000 mark.

With the RSI and MACD indicator sliding to their lowest levels since March, the path of least resistance seems to favour the downside.

However, with prices carving out a bullish Cup and Handle pattern and continuing to track firmly above the sentiment-defining 200-week moving average (1495.80), the longer-term outlook remains tilted higher.

Nevertheless, a pullback towards the 50% Fibonacci (1763.27) looks likely in the near term if support at the 61.8% Fibonacci (1812.36) and 1800 level gives way.

GOLD PRICES DAILY CHART – RSI DIVERGENCE HINTING AT REBOUND

Zooming into a daily chart bolsters the bullish outlook depicted on the weekly timeframe, as gold prices hold constructively above the 200-DMA (1799.28) and 1800 level.

Bullish RSI divergence is indicative of fading selling pressure and hints at a reversal higher, if Descending Channel support remains intact.

A daily close back above the 61.8% Fibonacci (1812.36) would probably open the door for prices to challenge the November 9 low (1850.62).

Pushing through that is required to bring channel resistance and the October high (1933.28) into focus.

Alternatively, breaching the 200-DMA could ignite a more extensive correction towards key support at the 50% Fibonacci (1763.27).

Reference by: Daniel Moss, Analyst for DailyFX