Gold Jumps out of Bearish Channel – Is it the beginning of a bullish reversal?
On Friday, gold finally gains support near $1245 after falling to six months low. Are you wondering what caused a sudden change?
On Friday, gold finally gains support near $1245 after falling to a six month low. Are you wondering what caused a sudden change?
There are two reasons which include:
1) U.S. Final GDP Disappoints – The gross domestic product was expected to grow at a pace of 2.2%, but the actual figure fell to 2%. Consequently, the weakness in the U.S. dollar underpinned gold.
2) EU Leaders Agreed on Conclusion – The Chairman of the talks, Donald Tusk said, “EU28 leaders have agreed on (summit) conclusions, including on migration”.
How it impacts gold price?
In response to this news, the investors moved their investments from Greenback to Euro. Therefore, the Euro jumped over 0.7% on Friday and dollar index fell 0.3%, causing a bullish reversal in gold.
There’s a strong negative correlation between dollar and gold which is why weakness in Greenback drives bulls towards the bullion.
Gold – Technical Outlook
Speaking about the technical outlook, it looks like gold has come out of the bearish channel. The breakout took place near $1,251 and gold is still trading outside the downward channel. It’s sort of a bullish signal for traders. But at the same time, 50 periods EMA is extending a solid resistance near $1,252.
Summing up – gold has a very strong support near $1.249 today. I will be looking to stay bullish above $1,249 to target $1,257, while selling entry will be preferred on the violation of $1,249 on the lower side. Good luck and stay tuned for more updates!
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