Gold feels more pain as bearish bias strengthens

Gold extended Friday’s decline to a one-month low of 1,720 during Monday’s early European trading hours, having previously pulled below its shorter-term simple moving averages (SMAs) and beneath the long-term constraining line that is part of the 2020 bearish channel.

The RSI and the MACD are currently warning that the ongoing bearish wave is still at an early stage as the former has resumed its negative direction below its 50 neutral mark, while the latter is gradually declining below its red signal and zero lines. Note that the Stochastics have also pivoted southwards in the midway towards their 80 overbought level.

If the bears claim the swing low of 1,727 too, which was a former resistance zone back in July, the door will open for the 1,696 floor. Re-activating the March downtrend below the 1,680 low, the bears may next take some rest around 1,640 before heading for the 1,600 – 1,593 region, where the channel’s lower boundary is positioned.

On the upside, the 1,753 – 1,772 territory, which encapsulates the 20- and 50-day SMAs, two restrictive lines, and the 23.6% Fibonacci retracement of the 2,070 – 1,680 downleg, will be critical to watch. In the event the bulls successfully breach that wall, the price may have a direct flight towards the August high of 1,807. The 38.2% Fibonacci of 1,829 and the 200-day SMA currently at 1,835 would be the next targets.

In brief, the short-term outlook for the precious yellow metal remains gloomy, as the bears seem to have more fuel in the tank. A close below 1,727 could incentivize more selling in the coming sessions.

About the author

Christina Parthenidou

Christina joined the XM investment research department in May 2017. She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics. Previously, she earned a bachelor of science in Economics from the University of Cyprus. Apart from foreign exchange markets, her research interests include the impact of International trade on labour markets and product development.