Gold has been in a rally mode since Thursday, after hit hitting support at $1758 the day before. Today though, that rally was stopped near the downside resistance line taken from the peak of Aug. 6, 2020.
For now, the metal has stayed below that line and trades above an upside line taken from the low of Aug. 9 this year. Thus, as long as it remains between those two lines, we will stay neutral.
To start examining further advances, we would like to see a break above the crossroads of the long-term downside line and the critical resistance level of $1834, which has been acting as a temporary ceiling since Jul. 15.
The next stop may be the $1857 line, marked by the inside swing low of Jun. 4, the break of which could pave the way towards the peak of Jun. 11, at $1903, or the high of Jun. 1, at $1917.
If neither territory can stop the advance, then a break higher could see scope for extensions towards the high of Jan. 6, 1959.
Shifting attention to our daily oscillators, we see that the RSI rebounded from slightly below 50 and is now close to 70, while the MACD lies above both its zero and trigger lines, pointing up.
Both indicators detect decent upside speed, suggesting that the metal may have the necessary strength to overcome the downside line this time around.
The Bearish Case
On the downside, we would like to see a dip below $1758 before we start examining whether the bears have stolen the bulls’ swords.
Such a move could also confirm the break below the upside line taken from the low of Aug. 9 and perhaps initially allow declines towards the low of Sept. 30, at $1721.
If that barrier doesn’t hold either, then we could see the fall extending towards the low of Aug. 9, at $1683, a territory that provided strong support back in March as well.