The Technical Trader  

Monday May 08, 2017 08:43

(Kitco News) - Spot gold popped higher in overnight trading. The gains are partly attributed to a "sell the rumor, buy the fact" type of bounce on news that Emmanuel Macron beat back far-right nationalist Marine Le Pen to win the French presidency.

European markets are breathing a sigh of relief that for now that France is expected to remain in the European Union, which triggered a risk-off type of trade in equities there. The gold market had been selling off leading up into the French election as polls revealed Macron as the expected winner. Monday's overnight gains were a "buy the fact" type of rebound.

Technically, the short-term gold trend has been damaged in recent sessions. Here's what the daily Comex June gold futures chart shows.

1. June gold futures cracked bull trendline support drawn off the December 2015 low, which is a negative near-term trend signal.
2. The short-term moving average outlook is negative for June gold as the contract trades below its 20-day moving average (shown in red) and the 40-day moving average (shown in blue).
3. Daily momentum is beginning to hook higher, but a sustained bullish turn has not yet been confirmed on the 14-day relative strength index (shown below the price chart).

What's next for gold?

The recent deterioration in the short-term trend, means gold bulls are swimming upstream right now. The burden is on gold bulls to generate fresh momentum and follow-through buying to improve the short-term outlook. A potential bullish outside day is forming on the daily chart early on Monday. But, a settlement in the upper third of the daily range would be needed to confirm that.

Key resistance: The 60-minute chart reveals initial resistance at $1,241.70. A sustained rally above that level would be needed to give gold bulls short-term confidence.

New support: On the downside, Monday's early low at $1,221.00 has become initial support for gold. Watch to see if that zone and the developing bullish outside day can act as a hook to stabilize the recent downtrend. If that fails, gold bears will eye a retest of the March 10 swing low at $1,198.00, marked at Point A on the chart.

Bottom line: The short-term trend bias is negative for gold. There is potential for gold bulls to build on the developing bullish outside day. But, there is more work to be done on the upside before the "All Clear" sign rings for gold bulls.