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Gold Surges to a Key Resistance Area

After making a low on the year at 1076.77, gold price has rebounded, and is now surging sharply towards some key levels. Take a look at the daily chart.

Gold (XAU/USD) Daily Chart 8/20(click to enlarge)

We can see that since making a price bottom, price has been pushing up fast. IT is now testing a falling trendline, and is in a previous support zone that might turn into resistance if gold is still bearish outside of the short-term (past couple of weeks). 

Within the bearish scenario, there still can be upside risk towards the 1170 area. However, if price closes above 1170, we should shift away from the bearish trend we saw in June-July. Instead, we should consider a possible sideways to slightly bullish market in the medium-term (next month or two). 

At this point, even if we do see resistance at or under 1170, we need to limit the bearish outlook to the 1120-1130 area, simply because the prevailing downtrend seems to be done. Gold might be entering a consolidation period like it did in late March. That turned out to be a multi-month consolidation. 

To be honest I wanted to look for a rally to fade, but not when it is so strong. I will wait for some near-term, short-term consolidation to form and break before making the next trade idea on gold. At most, I would put a small 1/3 position size around 1165, with a stop around 1180 and target around 1130.