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Gold - Potential break at 1.845 with a target at 1.965

Commentaries & Views

Gold is trading higher on Friday for the second day in a row after bouncing off the intra-week low of 1,808 reached on Thursday. In the week, gold is ready to close its second favorable period.

The metal closed the week with gains of around 0.30%, which is a small advance comparing the 3.35% increase performed the previous week. However, XAU/USD seems to be accumulating longs just below the 1.845 area, which has been tested several times during the week.

Disappointing US retail sales boost gold

Gold is taking advantage of the bad retail sales data in the United States. The report came out below expectations. The market took those numbers as a signal that the Federal government will not reduce fiscal stimulus to fight against the crisis produced by the COVID-19 pandemic.

In that framework, with more money flooding the US economy, more capital would be directed to the safe-haven gold, especially now that cryptocurrencies are in a period of high volatility and areas of price consolidation.

At the top of it, The University of Michigan released its consumer sentiment index, which also came below expectations and industrial production, which was also disappointing.

Gold seems ready to test the 1.845

Gold traded on a clear positive bias on Friday as it recovered from the 1,808 low. It looks ready to attack the 1,845 resistance, and the highest price traded in the last three months. Experts understand that the break will take time, and it could happen the next week as the metal is now under pressure from profit-taking positions.

As pointed in the chart, the recovery from the fall started on January 6 at 1,860 and ended in March with a double bottom at 1.677, and is now facing a resistance at 1.845, which has been tested several times since May 7.

In that framework, a break above 1.845 would open the door for a full recovery until 1.965, with a potential 120 dollar profit per unit. Be aware of minor resistance at 1.875. Buying zone between 1.850 and 1.860, after the unit consolidates a close above the break level.

MACD is favoring it.

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