Gold extended upside movement on Friday following the industrial production report from China. The precious metal is approaching a key resistance level that might result in temporary retracement. The long term sentiment however remains extremely bullish due to Higher High and Higher low on higher timeframes.
As of this writing, the precious metal is being traded near $1273 an ounce. A support can be noted around $1262, the 61.8% fib level ahead of $1231, the 76.4% fib level as demonstrated in the following chart. A break and daily closing below the $1231 support area could spur a deeper correction towards the double bottom support around $1180.
On the upside, the metal is likely to face a hurdle near $1287, the 50% fib level and 55 Simple Moving Average (SMA) ahead of $1312, the 38.2% fib level and then $1392 which is the swing high of the last major rally.
China Industrial Production
The industrial production increased in China to 8.8% during May as compared to 8.7% in the same month of the year before, a government report revealed today. Analysts had also predicted 8.8% industrial production in May, thus the actual outcome came out exactly in line with the expectations.
US Monetary Policy Outlook
The US Central Bank is expected to continue its aggressive policy by trimming the monthly asset purchase program in the forthcoming Federal Open Market Committee (FOMC) meetings. The tapering decision spurs bullish momentum in the US Dollar (USD) which consequently increases the selling pressure in gold and other precious metals.
Considering the overall macro-economic outlook and technical analysis, buying the precious metal on dips appears to be a good strategy, the stop may be placed at $1240 which is the low of the recent correction phase.