Gold shows no intention of altering bearish phase

Gold started Monday’s session on the wrong foot of what it could turn into its fourth consecutive week of declines.

The 1,870 area is currently buffering selling tendencies, but the momentum indicators are still feeding scepticism. The RSI is struggling to exit the bearish area, while the MACD remains comfortably below its red signal line despite stabilizing lately. Discouragingly, the Stochastics are looking for a negative intersection following the bounce off the oversold region.

Adding to the dim signals is the bearish crossover between the 20- and 50-day simple moving averages (SMAs), which lends more credence to the downleg from 2,070.

In the event the price slides below 1,870, confirming a broad neutral outlook, it could initially seek shelter within the 1,840 – 1,825 zone, which encapsulates the 200-day SMA and the long-term supportive trendline from March 2020. This is also where the 78.6% Fibonacci retracement of the 1,780 – 2,070 upleg is placed. Failure to pivot here could see a sharp extension towards the broken resistance trendline drawn from the 2020 record high of 2,079. If that floor cracks as well, the bears will head for the 2022 low of 1,780.

The way higher is also looking rocky. The 1,890 ceiling is currently a primary concern. A successful close above that bar is expected to prompt additional bullish movements, bringing the 20-day SMA and the 50% Fibonacci of 1,924 next into scope. If buying appetite grows beyond the 50-day SMA too, the way would clear for the 38.2% Fibonacci of 1,959, though only a sustainable increase above 2,000 would breathe life back to gold’s 2022 paused uptrend.

In brief, gold’s short-term technical picture is still grim. A close below 1,870 would further endorse the bearish mode in the market, though only a significant decline below the long-term ascending trendline would violate the pandemic-led positive pattern in the market.

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.