Early in the American session, gold was trading around 2,627 making a technical correction after having reached the top of the downtrend channel and now we are seeing a technical bounce.
A technical bounce is likely to occur up to the 2,640 area. If gold bounces above the bottom of the downtrend channel, we can expect it to reach 2,642. This area represents strong resistance as it coincides with the 200 EMA and could act as a strong top.
On the other hand, in case gold breaks and consolidates above the downtrend channel and above the 200 EMA, we could expect a further bullish movement. Therefore, the metal could reach 2,656, 2,695 and even 2,734.
A drop below 2,640 could accelerate the bearish movement of gold and the price could reach the psychological level of 2,600 which coincides with the bottom of the bullish trend channel forming since the beginning of November. The metal could even cover the gap left at 2,562. Finally, it could reach 1/8 of Murray located at 2,539.
The level to pay attention to is the area of 2,640. Above this, the outlook will be positive. In contrast, once below this level, we could expect gold to continue losing value.
