Gold bounce today keeps buyers interested going into month-end

On the month itself, gold is still down around 3.5% and poised for its first monthly loss since June. And if this holds, it would be the biggest monthly loss for the precious metal this year. That says a lot about how bullish sentiment has been for gold during the last twelve to fourteen months, that only a 3% drop sounds “bad”.

The rebound last week week helped to limit the post-election stumble in gold. But buyers were dealt a setback earlier this week. I would argue some added profit-taking also had something to do with it. In any case, it dragged gold down to test the 38.2 Fib retracement level of the rebound last week before buyers stepped in. Here’s a look at the near-term chart:

The bounce today builds on the hold yesterday at the technical level above, before buyers moved on to keep price above its 200-hour moving average (blue line). But as price action is still below the 100-hour moving average (red line), the near-term bias stays more neutral for now.

As much as the pullback in gold prices this month might have been timely, the depth of the correction is hardly anything material. It’s not even putting a scratch on the armor to the gold rally this year, let alone a dent of any sorts.

The outlook for gold remains bullish and we’re moving towards a more seasonally favoured period as well for the precious metal. While positive on paper, the one-sidedness of the moves this year is the only gripe I still have with gold heading into December and January. That despite still retaining a more bullish outlook in the big picture.

Going back to today’s action, the latest bounce doesn’t mean much from a technical perspective yet. But it shows that buyers are still staying in the game and are keen to step in to maintain the bullish momentum this year. The test of the 100-day moving average earlier this month also reaffirms that.

So, we’ll see if buyers can keep this up with month-end in focus and the dollar also seeing some softer flows today.

A push back above the 100-hour moving average near $2,660 will be a key near-term test to watch. If so, buyers may look towards another run at the $2,700 mark once more going into December.

This article was written by Justin Low at www.forexlive.com.