Gold has rallied strongly again today to trade at a five week high, breaching $1,150 in the process before running into resistance at the 50 fib level – 18 May highs to 20 July lows.
Given the longer term decline that the yellow metal finds itself in, it would not be a surprise to see a reversal at this level and continuation of the down trend. However, as highlighted yesterday (Gold – Bullish Flag Broken Ahead of FOMC Minutes), there could be some more upside following the break of the flag formation.
This is supported by the fact that price has consolidated since it ran into the 50 fib resistance, which is often a continuation signal.
If we see another rally through the 50 fib off the back of this, we could see a move towards $1,164, the projection level highlighted in yesterday’s article. This is based on the size of the flag pole – the rally prior to the consolidation – projected above the flag, as noted yesterday.
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