Gold extended downside movement yesterday and closed below the 50% fib level support, showing considerable weakness in the price action. The precious metal is expected to test the $1234 support area in the near future. The sentiment remains bearish due to Lower High (LH) in the recent wave.
As of this writing, the precious metal is being traded near $1283. A hurdle may be noted around $1283, the 50% fib level ahead of $1300 handle that is the 200 Simple Moving Average (SMA) on the daily chart and then the trendline resistance which is currently standing near $1312 an ounce. A break and daily closing back above the trendline will push the yellow metal into positive territory, opening doors for $1343.
On the downside, the metal is likely to find a support around $1267, the swing low of the previous wave and then $1234, the 76.4% fib level. A daily closing below the $1234 support area will threaten the double bottom support below the $1200 handle, triggering renewed selling interest in the precious metal.
The US labor department is due to release the nonfarm payrolls report on Friday. According to the average forecast of different analysts, the nonfarm payrolls rose to 210K last month compared with 192K in March, better than expected actual outcome will be considered bearish or negative for the precious metal, accelerating the selling pressure.
Based on the recent tapering decision by the Federal Reserve and technical outlook, selling the precious metal near the trendline resistance appears to be a good option, the trade should be stopped out once the price closes back above the trendline while the target should be around $1234 an ounce.
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