Overview:- Day before yesterday we have seen a dip in the gold at $1693 level which was a perfect level to buy as we can see that the $1690 is a strong support level and our bias remains bullish on the gold as long as $1690-85 support zone remains intact on daily closing basis. The primary, as well as secondary trend, is up so in an uptrend market buy on dips will be a profitable strategy.
Gold has been consolidating its gains after recovering from a dive below $1,700. Can it extend its gains on the last day of May? We have to be cautious today as its monthly closing so it may give us a massive rally which is on cards; however, we will get clear confirmation above $1735 level where bulls will get momentum once again and they will approach the $1765 and $1790 level.
The way bulls are reacting it seems like they are approaching the $1765 and 1800 level in the near term so there are two approaches- first buy on dips and second is buy above $1730 level.
Fundamentally there are few factors due to which we may see a bullish storm like- If the US-China war on words turns to more serious actions and Dovish Fed moves should be positive for gold. Stagflation will be better than low inflation of deflation due to which yellow metal may fuel up.
Technical Analysis: – From a technical perspective we can see the 1730 level is a short term key resistance level which is the confluence of the SMA 50 on 4 hourly chart and the SMA 200 on 1-hour chart as well as 50% Fibonacci retracement from recent peak and trough.
A short term downtrend line on the 4 hourly chart has started to breach out which is the recent development from bull’s side. Overall it is trading above all the minor EMA lines favoring the bulls. A bullish crossover on the MACD indicator is providing us a bullish signal and the RSI has turned up above 50 which is also favoring the bulls, now we just need a positive sign from price action.
Odds are in favor of bulls and daily to weekly bias remains bullish on gold as long as $1690-85 level remains intact on a closing basis. Also, bulls are playing at the front foot and it seems like bulls are going to continue with this game and will not provide any chance to bears. The $1690 level can be considered as a key support level followed by $1670 where $1750 is a key resistance level followed by $11665 level. Above $1765 level we may see a panic reaction from bull’s side.
Trade idea: – Based on the chart and study above we would suggest that traders may go for buy above $1730 for a target of $1765 and $1790 level with strict stop loss of $1710 level from intraday point of view and $1690 for positional traders on closing basis.
