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Gold heading towards potential rally
Gold has returned to an important cluster of support, with the 200-period (4-hour) simple moving average and trendline support coming into play. The recent pullback has still failed to regain the $1305 level, and this points towards a potential rally back into the wider uptrend unless that $1305 level is taken out.
For now, there are two potential trades around this trendline. Firstly, a potential long from the shorter term 76.4% retracement (current price), based on the premise that we will not see a break back below $1311 and instead move back to $1334.
That roughly provides a 3-1 risk-reward ratio. Alternately, a wider stop below the $1305 level and target of $1340, which would be a 2 to 1 R/R. Both are based on the potential for a break higher, which of course is not a given. Yet given the current depth of the pullback we are seeing, the value seem to be towards the upside rather than for further losses.