Gold Weekly Technical Outlook For Saturday July 31st

Gold dropped sharply to as low as 1155.6 last week but recovered strongly since then. Initial bias is neutral this week and we'd expect some consolidations above 1155.6 first. But still, upside should be limited by 1203.9 resistance and bring fall resumption. Break of 1155.6 will target 1124.3 support next. However, above 1203.9 will indicate that a short term bottom is formed. In such case, lengthier consolidation would be seen before decline from 1266.5 resumes.

In the bigger picture, gold's rally from 1044.5 should have completed at 1266.5. More importantly, whole medium term rise from 681 might have finished with five waves up too, on bearish divergence condition in daily MACD. Sustained trading below 55 days EMA (now at 1197.6) affirms this case. Deeper correction should now be seen to 1044.5 cluster support (38.2% retracement of 681 to 1266.5 at 1042.8) at least. After all, even in case of strong rebound, we'd maintain that risk remains heavily on the downside as long as 1266.5 high holds.

In the long term picture, we're proposing that 1266.5 is an important medium term top in gold and we should see a sizable correction going forward. A breach of 1000 psychological level is possible. However, there is no indication of long term up trend reversal yet. We'd maintain the long term bullish view and expect whole up trend from 1999 low of 253 to continue to 100% projection of 253 to 1033.9 from 681 at 1462 level after completing the correction from 1266.5.

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