Gold has started to rally sharply higher after US Federal Reserve Chair Jerome Powell said smaller interest rate hikes could begin in December, causing the yellow to test the $1,780 level.
Speaking at an event Wednesday, Powell said he expects the central bank will be in a position to reduce the size of rate hikes as soon as next month, which got gold bugs seriously excited.
However, Powell warned that monetary policy is likely to stay restrictive for some time until real signs of progress on inflation emerge, so this statement could also cap the upside in the yellow metal.
A major trend test is now likely as the metal moves towards its trend defining 200-day moving average, which is situated close to the $1,800 resistance level. The price is now only $20.00 away at the time of writing.
Should we see a bullish trend change, and the 200-day moving average broken I suspect we could see gold price headed towards the $1,880 level at some point.
Current sentiment metric towards gold shows that sentiment has become slightly more bullish, which hints that retail are leaning towards more gains this week.
The ActivTrader market sentiment tool shows that 54 percent of traders are bullish towards gold. Going forward, we really need to see a negative bias by retail to help the chances of a sustained recovery.
Gold short-term Technical Analysis
According to technical analysis gold the price of gold could be forming a triple double bottom price pattern on the four-hour time frame.
These types of patterns are usually very bullish. Additionally, a head and shoulders type pattern has also been invalidated. More gains towards at least $1,830 seem likely now.
Gold Medium-term Technical Analysis
The daily chart shows that the yellow-metal has been steadfastly moving towards its key 200-day moving average, which is found just below the $1,800 price.
We could see the price of gold revisit this metric at any time. It is very important that the $1,800 level is broken this week or a drop towards the $1,750 level could happen again.