Initiate short positions as the correction phase is underway. The COMEX Gold settled USD4.40 weaker at USD1,511.10. Trading range was relatively wide, between USD1,505.50 and USD1,523.80. The weak closing placed the precious metal below the low of 5 Sep of USD1,514.30. This, in our view, signals a strong likelihood that the commodity is now trading in a correction phase. This is after the commodity experienced a relatively sharp multi-month upward move between end May and early September, which saw its RSI reaching an overbought reading. Hence, we switch our trading bias to negative.

Our previous long positions opened at USD1,333.60, the closing level for 5 Jun, were closed out in the latest session at USD1,514.30. On the bias that the commodity is now trading in a correction phase, we initiate short positions at the latest closing. For risk-management purposes, a stop loss can be placed above USD1,566.20.

Immediate support is still pegged at USD1,483, or the low of 13 Aug. This is followed by the USD1,406 mark, which was near the low of 1 Aug. Meanwhile, the immediate resistance is now envisaged at USD1,566.20, which was the high of 4 Sep. This is followed by the USD1,600 threshold.

Source: RHB Securities Research - 10 Sept 2019