FXWIREPRO: Gold May Drop to $1130 Area If Fails to Break Higher
Gold bulls are facing critical test at this point, to break above or break below. Our previous call, to buy gold at $1200/troy ounce with $1180 stop loss is valid and in profit as gold is trading around $1230/troy ounce area. However, recent failures to break into higher ground, despite broad based weakness in Dollar shows the yellow metal in demand but not as much as initially thought.
Moreover, recent rise in equities and fading of risk aversion hasn’t been much of a help to gold. So while we remain bullish on gold in the medium to longer term and will prefer buying even if gold drops around $1130 area or below.
However, from short term perspective, there are several options to work with.
- One will be to take profit here, which would be around $30/ounce, still 1.5 times the risk assumed.
- Wait it out to see, how it plays out at key event risk tomorrow at FOMC minutes. Gold needs to break above at least $1250 area to keep the bullish momentum going.
- Gold bears can short gold here, with stop loss around $1280/troy ounce and target around $1130 area. Risk reward – 1:2
Kindly note, the above options are for the short term and not to be confused with long term bullish outlook from us as there could be many small bullish and bearish profit opportunities within the bull run.
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