Gold gives up March’s gains, looks oversold

Gold plummeted in the face of Powell’s hawkish interest rate rhetoric on Tuesday, reversing March’s gains from 1,858 to pause at 1,809 earlier today.

Encouragingly, the precious metal seems to have formed a doji morning star candlestick near its recent lows in the four-hour chart, with traders waiting to see whether the market can confirm the bullish pattern with another strong green candlestick. The oversold signals from the RSI and the Stochastics are also raising hopes for an upside reversal, though with the MACD having dived into the negative area, downside pressures could limit potential gains.

The 1,818 number resumed its resistance role yesterday. Therefore, a decisive close above that bar might be required for an advance to 1,830, where the 50-period simple moving average (SMA) is flattening. Moving higher, the price may encounter the 20-day SMA at 1,837 and the 1,847 constraining zone before speeding up to 1,860.If the bears retake control, the price may seek shelter near February’s low of 1,804. A continuation lower could strengthen towards the upper surface of the broken channel seen around 1,793, a break of which could find immediate support near 1,785 and then somewhere between 1,773-1,767.

Summing up, gold’s latest sharp decline seems to be overdone, making an upside reversal likely. For that to happen though, the yellow metal will need a bullish extension above 1,818.  

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.