Gemstone Equity Research & Advisory Services

This Bearish Divergence Is Causing Short-Term Deceleration Of Momentum In Gold

The Gold prices marked the incremental high near USD 1748 levels in April. However, if we see, they have been marking modestly lower tops and bottoms on the daily chart and seem to have got trapped in a congestion zone between 1680-1748 levels.

After witnessing a sharp recovery from USD 1455 levels in March, the Gold prices have failed to break out convincingly despite moving past the then immediate resistance that existed at the 1680-1687 zone.

The primary technical reason that once can attribute to this price behavior is the bearish divergence that is playing out on the RSI. It can be observed that despite the prices marking incremental highs since March, the RSI has been consistently forming lower tops and bottom. This is preventing the prices from inching higher with conviction and strength that is usually required for a sustained up-move.

Along with the bearish divergence that is playing out, the daily MACD is bearish and below its signal line. However, the indicator is above its centerline.
Any sustainable up move in Gold prices can be expected only after the prices move out of the consolidation area and move past 1735 levels while resolving the bearish divergence against the RSI.
Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

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