On the daily chart below, we can see the price of gold is falling nicely with the blue short period moving average acting as resistance. The price of gold is inversely correlated with US real yields.
Given that the market started to reprice a higher terminal rate from the Fed due to recent hot economic data and a resurgence of inflation fears, real yields are expected to rise and the price of gold to fall. The red long period moving average will act as the ultimate resistance for the bearish bias for now.
On the 4 hour chart below, we can see that the sell off lacks of momentum as depicted by the divergence between the price and the MACD. A divergence doesn’t signal only reversals, but also possible pullbacks within a trend. In fact, pullbacks are welcome in a trend as they keep it healthy.
A break of the resistance at 1855 could give a deeper pullback to the 1902 level as that’s when the divergence started. For now, the bearish bias is intact and the sellers will have even more conviction on a break below the 1827 level.
On the 1 hour chart below, we can see more closely the selloffs and the pullbacks. Given that yesterday’s US PMIs surprised to the upside we can expect the price falling to the support at 1827 with chances of a bigger selloff if the sellers manage to break below that level.
On the other hand, if the price breaks above the 1855 level, we may see the bigger pullback back to the 1902 level and that will be the last line of defence for the sellers.
