Gold Poised for Correction As Bears Gain Strength

Gold inched lower on Wednesday, decreasing the price of yellow metal to less than $1240.00 an ounce following some key economic releases. The technical bias remains bearish because of a lower low in the ongoing downside move.

Technical Analysis

As of this writing, the precious metal is being traded near $1239 an ounce. On the downside, a support may be noted around $1205, an immediate horizontal support ahead of $1200, a key horizontal support as well as psychological number and then $1180, another major horizontal support area.

On the upside, a hurdle can be noted near $1295, the high of the last major upside rally ahead of $1300, the psychological level as demonstrated with red color in the given below chart. A break and daily closing above the red mark shall trigger renewed buying interest, validating a rally towards the $1340 resistance zone. The technical bias shall remain bearish as long as the $1200 support area is intact.

China Growth Rate

China reported second quarter growth data Monday that topped expectations. The country said its second-quarter GDP growth was 6.9 percent against the prior year, and that comes as investors watch the world’s second-largest economy for any signs of slowdown amid concerns over high debt levels. Economists polled by Reuters on average had expected 6.8 percent growth in the April to June period against the same time last year, compared to the first quarter’s 6.9 percent. Economists in Reuters’ poll forecast second quarter GDP to grow 1.7 percent from a quarter ago. That was matched by Monday’s data.

Trade Idea

Considering the overall technical and fundamental outlook, selling the precious metal around current levels appears to be a good strategy in short to medium term.

 

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Usman Ahmed

Usman Ahmed is an individual forex trader and market analyst. He holds a Masters of Business Administration (MBA) degree. His work includes fundamental and technical reports on various currency pairs, commodity futures and stock markets. His technical analysis features price action strategies.

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