Gold Technical & Fundamental Outlook

Suggestion for Trade: Sell @ $1235, Stop Loss @ $1243, Target $1215.50

After a positive weekly and daily closing last week at $1238/ounce, gold began this week in negative territory and is likely to be engulfed by beers ahead of very crucial Fed monetary policy meeting on Wednesday in which policy makers of the US supreme financial body are expected to make a decision about tapering in asset purchase program as it was hinted in their last meeting.

Major Support & Resistance Levels

At the moment of writing, gold is being traded at $1234 per ounce during Asian session where it is likely to find an immediate support around $1215 (trendline support). A break below this level may trigger further downside price movement up to $1180 (100% retracement and low of 28 June 2013), a fall below this level may allow gold to print fresh multi-year lows.

On upside, immediate hurdle is seen around $1235-$1239 resistance area (Hourly 55 MA, Hourly 200 MA, H4 55MA and H4 100 MA), ahead of $1242 (trendline resistance). A break and daily close above $1242 may open doors for $1265 and $1279.

Technical Indicators

We have just got a bearish crossover signal through hourly 55 MA and hourly 200 MA, whereas on higher timeframes bearish crossovers had been noted a long way ago, so now gold seems to be under a huge influence of beers and further downside is very likely. No divergence is being noted at the moment on MACD. Relative Strength Index (RSI) is showing 45 to 50 readings on hourly to daily timeframes suggesting a downside risk is still there.

Fundamental Scenario

In addition to tapering speculations, US Industrial Production report for the month of November may also cause moderate volatility in the market, analysts are expecting 0.4% reading this time around against -0.1% of the previous one, a better than expected result will be bearish for Gold.