Buyers have surrendered the upside momentum seen since November
Price is now attempting a further break below the trendline support seen since November and that is a crucial break for gold as it means that sellers are starting to wrestle some meaningful control in the price action.
As it stands, there is still some support for buyers to lean on around $1,307.50 and then at $1,302.85 before the important psychological level of $1,300 comes into play. But make no doubt, the break of the trendline support is the more important one relative to the support levels mentioned.
So, what's next for gold?
As we move back under the trendline support and with price sitting between the $1,300 handle and said level, this is seen more of a consolidative phase before the next directional break in my view.
Price needs to climb back above the broken trendline for buyers to feel confident of another move back to the upside. Meanwhile, for sellers it is all about trying to break the $1,300 handle. If they manage that, it could start to open up further downside for gold back towards the mid $1,200 levels.
In January and February, we've seen gold's seasonal bias help to push it higher in observance of the Lunar New Year period. So, let's see what March is saying:
While March isn't the worst month for gold, it isn't a great month either. More often than not, gold tends to slip in the third month of the year and more notably those declines tend to take place after some heavy buying in the first two months of the year.
At its peak this year, gold gained by about 5% since the start of the year but erased most of those gains over the past two weeks. Believe what you will with seasonal patterns, but in my view the bullish seasonal backing for gold just about ran its course in the past week.
With the dollar still holding up well as it remains the best of a bad bunch among the major currencies space, gold's technical breakdown could lend further tailwind for the greenback to gain and that means there is decent potential for a downside move to come about in the coming weeks.
But once again, keep an eye on technical levels as that will dictate the next directional move in price for bullion.
