Gold prices are making a potential double bottom chart pattern – which is a trend reversal pattern.
Prices have broken above a three-point trendline drawn off the mid-November high of 1097.97 and are targeting the 38.2% Fibonacci retracement level of the drop since the middle of October high of 1191.47 to the December low of 1046.29. The 38.2% retracement is found near $1101, which is near the mid-November high.
RSI is in bearish territory above 50 and pointing upwards which suggests that upside momentum exists. Also the tenkan line crossed above the kijun line which is a bullish signal. Prices have pierced into the daily Ichimoku cloud but would need to clear the 1101 level and breach the 50% retracement around 1118, in order to weaken the bearish bias in the short term.
Looking at the bigger picture, gold prices have been falling since the 2011 high of 1920.80. The outlook is quite bearish as long as prices remain below the key psychological 1200 level.
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