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After a minor retracement, bears did get the last laugh as they pushed gold through another level of support to a fresh year to date low. Yet after stalling above a key structural level, it could be time for the bulls to have their say.
Large speculators remain net long but, as this has been the case since 2002, it isn’t the best gauge for gold’s short-term sentiment. For that we can use the slope of the net positioning, which has been in a steady decline during gold’s 8% depreciation over the last three months. However, whilst we see potential for gold to depreciate further (along with the bears who pushed gross shorts up to a 12-month high last week) we see a case for a corrective bounce building.
We can see on the weekly chart momentum remains bearish. Yet after stopping just short of the 1236.32 lows, this week’s candle is now on track for a bullish hammer or pinbar reversal. That this occurred after failing to break beneath the Keltner channel also points towards a rebound.
The daily chart shows a bullish engulfing candle halted the decline and, like the weekly chart, saw a sharp reversal back within the lower Keltner band. With two timeframes reversing at the lower Keltner band, the potential for a rebound could be greater.
Over the near-term, a break of 1261.14 could appeal to short-term traders with a view to target the 1272.64 and 1284.11 highs. What makes this level more interesting is that it marks the low of a bullish hammer and this week’s high (also a hammer). However, until we see a material change to the daily bearish structure, further depreciation could be more likely following the retracement. And, with little in the way of obvious support between 1204.70 and 1236.32, bears could find themselves rejoicing again.
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