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Gold is currently testing the upper limit of its medium term bullish channel at 1,698 suggesting a decline. However, a break of these levels will release a good potential and initiate a more violent bullish trend.
Technical indicators provide sell signals and evolve in overbuy zone supporting the assumption of a decline. Bollinger bands are much discarded as a result of a strong increase these days. Stabilization is expected in a short-term. Furthermore, the superior band strengthens the upper limit of its channel supporting the hypothesis of a violent movement in case of failure.
As gold is currently testing the upper limit of its channel, we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell at the level of 1,698 with the 1st objective at 1,687 and then at 1,685. A breakthrough 1,701 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” which means buying the spot rate as soon as it is broken through its resistance of 1,698 with the 1st objective at 1,708 and then at 1,710. A breakthrough 1,695 will invalidate this scenario.
