Gold yesterday closed in negative territory around $1236 per ounce after worse than expected growth and slow industrial production in China. The yellow metal is likely to extend correction up to $1221 that is 50% fib level of recent move.
At the moment of writing in Asian session the precious metal is being traded at $1225 per ounce where immediate support is seen around $1230-31, a confluence of 61.8% fib level and 55 DMA. A break and close below this support zone will be targeting very crucial $1221 that is 50% fib level and last notable support point ahead of $1218, swing low of previous wave.
On upside, resistance can be noted around $1241 which is 76% fib level and then near $1260 that is swing high of last upward wave.
Thus as per above mentioned price action signals buying at $1221 with a stop at $1217 and target $1260 can be a good option because as far as we don’t witness a Lower Low at daily chart, bias shall remain bullish about bullion price.
There are two reasons for current downside price movement in gold. First technically after printing a Higher High (HH) a correction always occurs according to typical behavior of price movement (also known as swing analysis). Secondly, we saw worse than expected growth as well as industrial production figures about Chinese economy. Asian nation is the largest consumer of Gold and many other commodities thus slow industrial production and growth signaled lesser demand in near future that ultimately caused downside movement in Gold price.
It is also to be noted that Federal Open Market Committee (FOMC) policymakers are due to gather in monetary policy meeting later this month where an announcement about more tapering in monthly asset purchase program (now worth $75 billion) is very likely.