Gold prices have retraced a huge portion of yesterday’s gains after the break of 1,315. However, prices remained above 1,315 with Stochastic readings within the oversold region. This strengthens the significant resistance turned support level, and may be the short-term test/confirmation of 1,315 which we mentioned yesterday.
Even in the event that prices does break 1,315, it is likely that support will be found along the rising wedge. As such, overall short-term uptrend will remain intact unless a deeper bearish correction is seen. This would also mean that a move back 1,315 and yesterday’s swing high of 1,325 is possible.
Nonetheless, it is important to note that market sentiment is highly bearish right now after yesterday’s sell-off in stocks which saw Nasdaq clocking in a triple digit loss. As such, if prices does suffer a significant correction we can interpret that underlying sentiment is highly bearish, and it is highly likely that stronger sell-offs will happen moving forward should stock market stabilize once again.
It is also important to look at Commitment of Traders numbers which will be released at the end of trading today. This is because institutional sellers have been seen clearing a huge portion of their bullish positions in the past 2 weeks, and recent rally from 2nd April low has been largely attributed to them buying as well. Hence, if institutional speculators are reported to be continuing their selling behavior, we will have yet another bearish factor hovering, increasing the likelihood of prices pushing below lower wedge and even 1,300 round figure in the following week.