With there looking to be a risk rotation in play (perhaps ahead of month-end/quarter-end), gold is failing to find much comfort despite lower bond yields. The yellow metal dropped by 0.7% yesterday but more importantly, it took out a key support level on the chart. The 100-day moving average (red line) had been a key point for buyers to lean on in the past few weeks but that has now been broken.
There is still some semblance of support from the 50.0 Fib retracement level of the swing higher from March to May this year, seen at around $1,935.84. However, a break of the 100-day moving average in itself does put sellers in a good spot to search for further downside momentum.
The question is, how much of the flows we're seeing so far this week has to do with the rotation play above? That could challenge the conviction for a steeper downside move in gold. But if you go purely by the technicals, things are certainly lining up for sellers to start running with a move lower.
The key risk event today will be Fed chair Powell's testimony to Congress but keep an eye out on UK inflation data as well.
If price does start to trip lower in the sessions ahead, the $1,900 is the next big level to watch.
