FxWirePro: Gold outlook – short term upside target reached, awaiting FED

Gold has reached our target area of $1090/troy ounce, for call given last week on Thursday. However it hasn't traded at $1090/troy ounce, but it would be fair to say that area has reached, with price trading as high as $1088/troy ounce.

We have been reminding over and over again, that Gold is currently trading at the floor of a downward sloping channel, which has been in place since April, 2013. So if upside risk reward is immense if gold do bounce back and then it might test channel ceiling somewhere around $1200/troy ounce area. That is more than 4:1 risk reward ratio.

To add to that, two key elements need to be considered. Last week, gold rose sharply, despite better than expected payroll data and last week not only gold closed positive after six consecutive weekly decline, it formed an engulfing candle indicating waning bearish sentiment at channel floor.

However, two points need to be considered here, a rate hike from FED is approaching within two weeks and there considerable uncertainties over post reaction. Secondly except for jewelry demand, gold buying is pretty lacklustre, especially in the investment side.

So there is a possibility that gold might break the channel to the downside over FED hike and drop to test vital $1000/troy ounce area but unless that break, we are considering the bullish possibilities quite seriously.