XAU/USD fell sharply yesterday, breaking two support (now turned into resistance) barriers in a row. That said, the slide was stopped near the 1479 level, still within the sideways range that’s been in place since October 1st, between 1475 and 1517. So, despite yesterday’s tumble, as long as the precious metal remains within those boundaries, we would stay sidelined.
We would like to see a clear and decisive dip below the range’s lower end, at around 1475, before we start examining the bearish case. Such a break is likely to see scope for declines towards the 1459 zone, marked as a support by the low of October 1st. Nevertheless, before this happens, given that yesterday’s slide was steep, we would stay careful of a possible rebound before the bears decide to take charge again, perhaps for the rate to test the 1495 area.
The case for a small bounce is also supported by our short-term momentum studies. The RSI has bottomed slightly below 30 and emerged back above that line, while the MACD, although below both its zero and trigger lines, shows signs that it could bottom soon as well.
Now, in case the metal continues to recover above 1495, we would take this as a sign that traders want to keep the metal range-bound for a while more. Such a move may initially allow advances towards the low of November 1st, at around 1503, the break of which could open the way towards the upper bound of the range, at around 1517.
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