Gold up for sixth day as stocks dollar remain on shaky footing

Gold was a tad lower first thing this morning – understandably so after Tuesday’s big rally – before turning positive in the afternoon. The precious metal is now up for the sixth consecutive day and has made back almost the entire losses suffered earlier in the month.

I am expecting gold to rise further. Wall Street is on a shaky footing, which could very well keep demand for perceived safe haven assets high. On top of this, the dollar continues to remain under pressure, which should keep the dollar-denominated commodity underpinned. The USD/JPY has broken below significant support around 111.50, while the EUR/USD was testing the top of its recent range around 1.0820/30 at the time of this writing. If these dollar crosses move further in the direction of their current trends, the greenback could suffer from momentum selling. Correspondingly, gold could benefit.

From a technical perspective, gold’s almost v-shaped recovery from the key $1200 handle suggests more gains are likely to be seen. But the precious metal was testing an important level at $1251 at the time of this writing.  This level was the last support pre breakdown at the end of February. Once support, it could turn into short-term resistance. However, the manner in which gold has risen suggests to me that more gains are likely. The next levels of potential resistance – or bullish targets – are shown on the chart. Among them are the 200-day moving average at just shy of $1260; the previous support and resistance area between $1263 and $1269, and the 61.8% Fibonacci retracement level at just below $1279.

But these could turn out to be temporary stops ahead of significantly higher levels if demand for gold remains elevated, say, as a result of a stock market crash. Indeed, should gold break its well-established long-term bearish trend line, then that should pave the way for more follow-up technical buying.

Meanwhile on the downside, there are plenty of potential support levels to watch. The key ones being at $1235 and then that $1200 handle. If the latter breaks down, this would invalidate this bullish long-term outlook on gold.