The beginning of 2018 was still bullish for the Gold and its price reached 1,326 dollar/ounce just yesterday thanks to a deep climb started from 1,306 (+1,53% in a day), but now the price of Gold could fall through technical levels marked by Fibonacci, that’s three reasons for a possible retracement.
1. Technical analysis shows a strong resistance
The price of gold climbed with no stop since 1,243 technical support, touched last December, and the 23.6% level of Fibonacci retracement was the first true wall for the rally of the commodity: yesterday’s false-breakout confirms the strenght of this level and now the traders are starting to close their “buy”.
The price decreased to 1,316 $ today, as the sales start to prevail. The trend could have a strong correction and the 38.2% of Fibonacci could be the first target. 1,294.15 $ is an important and historical level for the price of gold, a descent until this technical support is possible and it will be the test to evaluate lower targets.
2. The stock market has rediscovered enthusiasm
The stock indices started a new increase in prices after the strong sales of December, possible indication that investors out of market one week ago are coming back in the market in the new year. Confidence in stock market is inversely proportional to purchases of gold, refuge-good for excellence, so the risk-propension and the focus on equities and indices could be valid reasons for a retracement of the price of gold.
Here are a comparison between the prices of main American and European stock indices and gold in the early 2018:
3. Forex pairs reached critical areas
US dollar is recovering strenght in the foreign exchange market, after a long compression period. EUR/USD and GBP/USD reached historical resistance and the achievement of these targets could justify new sales for Euro and British Pound. At the same time, USD/JPY and USD/CAD, where the dollar is denominator, are floating in crucial areas which could be the start of a purchase-phase for the US dollar. The inversal relation between US dollar and gold is the last reason why the price of gold could go through a sales phase that would compress the price.