FxWirePro: Downside opens up as yellow metal fails to clear resistance line

A further decline is likely in gold.

• A recovery in the USD this week has pushed the gold price down as the bulls failed to clear a key resistance line as shown in the chart above, which has been in place since February this year.
• Gold price breached the resistance line on Monday, and it was testing psychologically significant $1300 resistance area.
• However, follow up breakout momentum was clearly absent as the gold price continue to struggle through the week. The break to the downside came yesterday, as the price dropped below the resistance line.
• The false breakout has now opened up the possibility of a further downside in gold before bulls re-emerge.
• Fading of risk aversion sentiment has also been behind the price drop as investors returned to risky assets like stocks as speculation of a trade truce at the coming G20 meeting gained traction. President Donald Trump and President Xi Jinping are set to meet on the sidelines of the G20 meeting to be held in Japan at the end of next month.

Trade idea:

With gold price making a false breakout, we expect the price to decline towards the lower end of the channel around $1260 per troy ounce area. Sell gold around $1293 area. The price is currently at $1287 per troy ounce.