Gold Holds Steady above $1700 Mark as Bullish Bias Remains

Gold markets have rallied a bit during the trading session on Tuesday reaching towards the $1700 level. Beyond that, the market even rose to the $1710 level during the US session and continued to bounce around in a large symmetrical triangle. The biggest problem with the symmetrical triangle is it does not tell us which direction the market is most likely to break. However, using trend analysis it is easy to see that we are at a much higher level than we were just Feb 2020.

The recent price action over March and April 2020 shows that it has been confined between two converging trend-lines forming a symmetrical triangle. The triangle also marks a brief consolidation phase before the next leg of a directional move. Given the commodity's recent strong rally from year-to-date lows ($1455) to multi-year tops ($1748) the triangle further seemed to have constituted towards the formation of a bullish continuation pennant pattern on the daily chart.

Meanwhile, oscillators on the mentioned chart have managed to hold in the positive territory and support prospects for an eventual bullish break through the near-term trading range, setting the stage for additional gains. The triangle resistance is pegged near the $1720 supply zone, which if cleared might be seen as a fresh trigger for bullish traders and lift the commodity back towards retesting multi-year tops around the $1748 area.

From a fundamental analysis standpoint the market is likely to see demand due to the central banks around the world continue to print currency as quickly as they can, and of course buy other assets. Now it is highly likely that the market will continue to see a lot of inflow and volatility. If we can break above the downtrend line then the market is likely to go looking towards the $1750 level, and then possibly the $1800 level after that.

From technical analysis sellers look for entry below 21-day EMA level of $1,693 for fresh entries to target an ascending trend line from April 21, at $1,678, until then the bullion’s odds of refreshing the monthly high beyond $1,723.70 cannot be ruled out.

For short-term price trend, the yellow metal has a short-term bullish bias while price trades above the $1,676 level. A major directional breakout for gold appears to be around the corner as the price remains trapped with a narrowing symmetrical triangle pattern. According to the size of the triangle pattern, a powerful breakout will happen once the $1,677 to $1,725 range is broken.

On the other side, any dips might still be seen as a buying opportunity and help limit the downside near the triangle support, near the $1685 region. That said, a convincing breakthrough will negate the constructive set-up. The commodity might then accelerate the slide towards intermediate support near the $1670 region and the $1660 level. Some follow-through selling below 50-day SMA, around the $1648 zone might be treated as a key trigger for bearish traders. However, Bulls still have the upper hand while the price trades above the $1,690 level.