FxWirePro: Gold’s minor downtrend likely to extend on double top – Trade tunnel spreads and uphold long hedge

We recently raised a cause of concern for Gold’s (XAUUSD) rallies in the short run.

The breach above $1,400/mt level on a perfect mix of ingredients, but the gold is driving up to the next strong supply zone of $1,450/1,500/mt in the long-run. 

We also stated about spinning top and gravestone doji that have occurred at the peaks of the rallies at 1423.48 and 1418.67 levels respectively on daily plotting.

We now traced out double top pattern with top 1 $1,439.14, top 2 at $1,437.66 with neckline at $1,382 levels.

Thus, the minor trend now appears to be weaker on this double top pattern, in addition, bearish engulfing pattern at $1,387.38 level also signals further weakness, all these indications coupled with the signals by the daily charts, the price is most likely to plummet further on the bearish DMAs and MACD crossovers.

For now, the strong support is seen at 1380 levels, if bulls manage to hold these levels, then the uptrend may resume, otherwise, we have all signs of steep slumps up to $1,350-$1,355 areas.

On monthly terms, bulls break-out the stiff resistance and hamper the potential triple top formation (refer monthly chart). As a result, the current prices spike off well above EMAs with bullish crossovers, thus, we could foresee the uptrend is most likely to prolong further amid mild weakness in the minor trend as both RSI and stochastic oscillators indicate the intensified buying momentum. 

The buying sentiment is seen in the bullion market stronger on this timeframe, having broken the 6-year resistance levels of $1,400/oz and having largely consolidated between $1,200 to $1,400 for the better part of three years. 

On trading grounds, at spot reference: 1390.01 level, one can think of tunnel options spread strategy with upper strikes of 1395 and lower strikes of 1382,16 levels.

Alternatively, on hedging grounds, we advocated long positions in CME gold contracts. We now like to uphold the same strategy by rolling over the contracts for August’19 delivery as we could foresee more upside risks.