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As we predicted yesterday, gold broke the upper limit of its channel at 1,699 leading to an acceleration and initiated a more violent bullish channel. It approaches now the upper limit of this channel at 1,720 suggesting a decline. However, a break of these levels will free a large potential and initiate again a more violent bullish channel.
Technical indicators provide buy signals and evolve in overbuy zone supporting the assumption of a decline. Bollinger bands are much discarded as a result of a strong increase of 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 approaches the upper limit of its channel, we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell a the level of 1,720 with the 1st objective at 1,710 and then at 1,707. A breakthrough of 1,723 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” that means to buy the spot rate as soon as it is broken through its resistance of 1,720 with the 1st objective at 1,730 and then at 1,735. A breakthrough of 1,717 will invalidate this scenario.
