Gold is down by 0.4% on the day
The high this week hit $1,875 and gold tried to keep above its 50.0 retracement level of the November swing move lower @ $1,865.20, but ultimately that failed to hold.
We are seeing price action now reverse course and sellers are continuing to contest key near-term levels as we head into the second-half of the week.
The drop yesterday tested the 200-hour moving average (blue line) but buyers held on somewhat and we are nearing a test of that once again currently.
That is seen at $1,830.85 at the moment and will be a key near-term level to watch in the day ahead. Hold above and the near-term bias stays more neutral but break below and the bias turns more bearish instead.
While gold has also benefited from the dollar decline in general, the recent pause for breath in the market over the past two days hasn't been kind to the yellow metal.
That may see some choppier flows ahead of the year-end but there's also still added easing by the ECB and perhaps the Fed, not to mention US stimulus, which could bolster gold in the next week or so. Adding to that is seasonal factors as well.
But one cannot simply ignore price action as well. A drop below the key near-term level above will open up the path towards some support closer to $1,823 but the $1,800 level will once again be the key psychological support level to watch.
As for sentiment, I would argue that the November flush felt a little too short-lived. I expected a sharper correction towards $1,720-50 but dip buyers were quick to step in.
Although there is a good argument for gold's long-term prospects, there might still be some scope for a pullback especially if we see year-end positioning adjustment play out in other asset classes in the coming weeks.
In any case, any deeper pullbacks will continue to offer another dip-buying opportunity in the bigger picture but it comes down to picking your risk appetite level.
