On the daily chart below, we can see that gold sold off from the 2076 record high as stronger than expected US economic data made the market to reprice interest rates expectations on the hawkish side. Gold is inversely correlated with real yields and this hawkish repricing in the rates path saw real yields rising, ultimately weighing on gold.
The price has now pulled back to our expected strong support zone where we find the upward trendline, the 1934 swing low level and the 50% Fibonacci retracement level. This will be a make-or-break moment for the buyers as a breakout would open the door for a bigger selloff into the 1800 swing point.
Gold Technical Analysis
On the 4 hour chart below, we can see that we now have also the downward trendline defining this latest downtrend. A break above the trendline would give the buyers more conviction for a return to the 2076 high. We can also notice that the recent swing low is diverging with the MACD.
This is generally a sign of a weakening momentum and it’s often followed by pullbacks or reversals. So, if we see gold breaking above the trendline, the target will be the 1984 resistance and if that resistance fails, then we have high probabilities of seeing gold again at the 2076 level if not higher.
On the 1 hour chart below, we can see that the bearish momentum looks exhausted as we start to see more rangebound price action near this strong support zone. The buyers are likely to pile in here targeting a break above the 1954 resistance and a rally towards the 1984 level. The sellers, on the other hand, may lean on that 1954 resistance to target the breakout of the 1934 support zone, but a more conservative and higher probability trade would be to just wait for gold to fall below the support zone to then target the 1800 level.
