Gold surged last week and gave a closing at $1247 /ounce after a release of the worst non-farm payrolls report in more than 35 months.
The precious metal may face an immediate resistance around $1250 that is a horizontal resistance zone as well as 38.2% fib level ahead of $1267, high of last up move and then $1271, 50% fib level as shown below.
On downside Gold may find support at $1239, 55 DMA ahead of $1224 and then $1180-82, historical support zone.
Higher High (HH) on daily chart?
If we look at daily chart it also shows that bullion is poised for Higher High (HH) after posting Higher Low (HL), look at the following chart;
A combination of HL and HH is always considered a very good sigh of steady bullish momentum.
Last correction wave of EW pattern about to end
EW pattern shows that precious metal has almost ended the last correction wave as charted below:
More downside movement would prolong the wave C which is not desirable as per EW theory.
Double Bottom Pattern
If you analyze the weekly chart closely you will find an ideal double bottom price pattern as shown in the following chart:
The highest point between the two bottoms is at $1433 which is called the neckline of Double Bottom Price Patten and this has to be broken for steady upward movement towards final target of $1750.
Contrary to all the above technical indications, we may note some clear negative divergence in four-hour chart which points to downside risk before further upward movement.
We have some important fundamental events due this week that include the US Retail Sales and Inflation data for the month of December. On the other hand we saw some significant rise in physical demand from China at the beginning of 2014. If this trend continues; it would further uplift the price of precious metal.