Gold continues to battle important support and resistance levels along the downtrend line started in April this year and a break is likely in the short-term. The daily chart shows support around $1,205/oz while the four-month downtrend currently sits around $1,212/oz. This range has compressed in the last 7 trading sessions and is likely to break with risk-reward favoring an upside breakout. Above the downtrend line, Fibonacci retracement at $1,215.4/oz. has come into play and gold has already briefly broken above here before retracing below. Gold bulls will need to see sustained trading and a close above $1,215.4/oz. to confirm the start of a short-term rally with the 20-day moving average at $1,220.5/oz. the first target ahead of the December 12 swing low at $1,236.6/oz. On the downside, support at $1,205/oz. remains strong and should hold, all things being equal.
Away from the charts, any cessation in global trade/currency wars will likely put downside pressure on gold while USDCNH should also be watched closely. This pair and gold have traded in lock-step since March and any further weakening of the offshore Chinese Yuan - currently at 6.8310 - will also add weight to a bearish move.
However recent daily and weekly sentiment shifts suggest that gold may reverse higher.