The price of gold has started the trading week in positive fashion, as the yellow metal continues to probe around the $1,800 level and has so far traded as $1,815 in early-week trade.
Gold has also benefitted from a statement from, The World Gold Council, saying one in five central banks intends to increase gold reserves over the next year. Serbia even went as far as to announce it would boost gold holdings from 36.6 tons to 50t tons in the near term.
It should be noted that the World Gold Council is known to be a lobbyist for the gold industry, however, the fact that central banks around the world are increasing gold reserve is still extremely bullish for gold demand of we consider they buy in tons rather than kilos.
On the technical front, gold found strong buying demand around the $1,750 level last week. It was particularly important for the ongoing uptrend in the metal that gold held above the $1,730 to $1,680 support cluster.
Furthermore, the bigger picture still shows that a massive cup and handle pattern unfolding on the weekly time frame, which is potentially foreshadowing a massive breakout to the upside once the $1,980 level is surpassed.
Current sentiment metric towards gold suggest that traders are turning less bullish towards the yellow metal. The ActivTrades market sentiment tool shows that 62 percent of traders are still bullish towards gold.
A drop of nearly 11 percent has taken place in bullish sentiment since last week. This is good news for contrarian traders, as it means that the herd is moving away from the yellow metals as gold starts to find a price floor.
Gold short-term Technical Analysis
The short-term technicals for the yellow-metal shows that a bullish breakout from an inverted head and shoulders pattern is close to being underway, as the price trades around the $1,800 level.
According to Fibonacci extension analysis the $1,853 level is the first bullish target if the $1,815 level is broken, however, the 61.8 Fib extension at $1,877 level is the most probable short-term target.
Gold Medium-term Technical Analysis
According to the daily time frame, gold has bounced from a key technical support zone, meaning that gold is away from danger zone all the while it trades above the $1,730 to $1,680 support area.
On a long-term basis, gold is clearly starting to form a cup and handle pattern, which looks to be near completion. More aggressive traders may look to accumulate gold around current levels in expectation of an explosive breakout above the $2,000 level in the long-term.