While Gold continues to be a high beta risk trade, the 9-period daily RSI has formed an important base just above the 30 region. Back in December, RSI initally based above the oversold threshold when Gold rebounded off bull trendline support (off the October 2009 low). The subsequent RSI base at the end of January (above 30 again), triggered a rebound off a 15-month bull trendline.
The brief counter-trend recovery ran into a triple failure of sorts. The same trendline that had previously supported price-action in December had now reverted to resistance. The 50-day MA and a 2-month bear trendline also contributed to last week's relapse. Once again, the key RSI base above 30 supported price-action, completing an A-B-C correction off the all-time high and marking a bullish hammer formation on Friday.
The latest rebound has demonstrated bullish RSI divergence off the aforementioned base and now eyes a break above 8-week bearish RSI trendline resistance. If, however, price-action fails to clear former 15-month trendline support (now at 1084), there is a strong probability of retesting Friday's low at 1043 and the key RSI base. A weak test or marginal breach of 1043 would present a significant long-term buying opportunity. Meanwhile, a sustained loss of the RSI base would suggest a deeper retreat that would immediately expose the 200-day MA near 1024.
