Gold rallied strongly during the week to key resistance above $670 which now threatens to end the corrective downtrend from $698 that has seen gold fall to a low of $641 three weeks ago.

Gold Outlook

The break above $666 changes the nature of the downtrend from the $698, as it now implies immediate strength and support for Gold.

Key resistance between $675 and $680 held the immediate uptrend. A Break of this resistance area would immediately target a move to the $698 high which would be expected to break and signal the move to continue towards the high set during May 06 at $730.

However, Gold has yet to break this resistance area, and therefore the corrective downtrend from $698 still remains intact, despite last weeks strength. The most likely outlook for gold over the coming week is to consolidate between $675 and $650.

Key levels of importance for the consolidation scenerio are for gold to hold the $646 low. A failure here would target $641 which would be expected to break and signal a continuation of trend lower towards the $600 target for the corrective downtrend.

The Lower MACD indicator is currently in an uptrend and gave a bullish cross over a week ago which signaled support for Gold and confirmed an immediate uptrend towards resistance.This pattern is expected to continue to support Gold over the coming week.

Summary

The break above $666 has strengthened Gold, expectations are for Gold to consolidate before attempting to break higher above $680, towards $730. A failure to hold $646 / $642 would signal a continuation of the corrective downtrend towards $600.

By Nadeem Walayat
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