Gold Price Running Back Into Resistance as the US Dollar Slides

NEW YORK (Oct 26) The precious metal is running higher on the back of a weaker US dollar and is testing a former area of support turned resistance. Gold will need to make a confirmed break of $1,730/oz. though if the backdrop for the precious metal is to turn bullish.

The US dollar is sitting on a zone of support that has held for the last month and is making a double-bottom pattern in the process. This technical pattern normally suggests a price reversal, from bearish to bullish, but a break of the neckline - currently around 113.85 - is needed to confirm this set-up. A break and open below this area however leaves the US dollar likely to re-test a prior swing high and a cluster of prior lows around the 109.30 level.

Gold remains stuck in a downtrend with a series of lower highs and lower lows intact. The rebound off the double-low around $1,616/oz. has given the precious metal a slightly more positive outlook but sterner tests lie ahead. Around $10 above the current spot price lies a zone of resistance made off a prior swing low and a cluster of, mainly, failed attempts to break higher. The early October break higher was quickly reversed and this area has held gold at bay over the last 2-3 weeks. If gold can break this area, for the chart to turn positive the last swing low at $1,731/oz. would need to be broken. This may be difficult in the current climate.

DailyFX