Gold Bulls Face First Test
We’re seeing some more profit taking in gold on Tuesday, with the rebound in the dollar and stronger risk appetite likely contributing to the declines.
Gold failed to break above $1,350 on this occasion, or hold above the February high, but that doesn’t necessarily mean the rally has run its course. Price has now fallen back toward $1,320, which could be an interesting test, having previously been a notable area of resistance. A rotation off here could see last week’s highs coming under pressure again.
A break below here wouldn’t be particularly concerning though, as the rally that preceded it was very strong. We’ve only seen the rally correct by around a third now – a level that will be of interest to traders – but a deeper correction is hardly a red flag. The $1,300-1,310 area could be much more interesting, at which point we’ll get a much better idea of just how bullish this market is.
As you can see on the chart above, the momentum indicators don’t show any divergences forming at this point, which may support the view that a deeper correction is in the cards.