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Technical Analysis of Gold

After struggling at $1700 and then at $1600 gold broke its long up-trend line in May and has been trading side-ways around the $1500 level ever since. As the global economy is slowing down further, which would likely result in deflation, and leading central banks remain inactive, we could see gold further losing its safe-haven status and trading in line with the rest of commodities. Investors have recently been heavily relying on governments and central banks to support asset prices by printing money but as the Fed’s extended Operation Twist in June, there seems to be little room for more quantitative easing in the near future. With the bearish alignment of the 20 EMA below the 50 EMA on the daily chart still in place since March and the RSI hovering below the 50 level, indicators paint a bearish outlook for the precious metal. Next support level for the yellow metal to test sits at $1500. A break below that level could trigger a hard sell off sending gold prices to fresh lows. An alternative scenario is hard to imagine unless there is some kind of intervention from central banks.

Dafni Serdari
Market Analyst
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