Gold prices ended a 7-day winning streak after profit taking occurred after reaching a key technical level. The $1,200 handle remains a critical resistance level and a near 7 ½ month high for the precious metal. The recent rally was triggered from risk aversion as global equities come under pressure.
The yellow metal may continue to climb in 2016 as expectations shift for the Fed to continue its tightening schedule appears to be leaning toward a slower rate hike pace. If we see price finish the trading week above the noted resistance level, prices may eventually target the $1,230. Further upside targets may include the $1,250 zone.
Price action on the gold daily chart shows that since closing above the 200-day SMA, the recent rally extended and is finding resistance from the downward sloping trendline that started with the March 2014 high. If we see a substantial pullback, price may find support from the $1,170 level. Deeper support may come from the 200-day SMA, which currently trades at the $1,131 level.
The trade: Buy Gold at $1,115 with a stop loss at $1,105 and a take profit at $1,145. The Risk/Reward Ratio is 1:3