Gold prices had their largest daily decline in three weeks as global equities rallied from positive earning season reporting and as Brexit worries eased. The political uncertainty surround Brexit eased and expectations are high for the BOE to launch new stimulus into the economy at Thursday’s July 14th meeting or August 4th meeting.
The return of bullish bets for the yellow metal stemmed from Britain’s vote outcome to leave the EU. Another catalyst is speculation that the Federal Reserve will refrain from raising interest rates and perhaps may even considering cutting this year.
Price action on the gold daily chart shows that the bullish rally has resumed after price rallied above all three key (200-, 100- and 50-day) SMAs. Currently price is forming a bearish ABCD pattern. Point D is targeted just ahead of the 200.0% Fibonacci expansion level.
If bullish momentum returns, we could see priced target the $1,400 level. Longer-term upside targets include the $1,484 zone.
If we see a return to the downside, deeper support may come from the psychological $1,300 handle, with major resting at the 50-day SMA, which currently trades around the $1,282 level.
The trade: Buy Gold at $1,305 with a stop loss at $1,295 and a take profit at $1,345. The Risk/Reward Ratio is 1:4