- A combination of divergent factors fails to provide a significant boost to gold.
- Price action within a range constitutes the formation of a bearish rectangle pattern.
- Neutral oscillators warrant caution before positioning for any firm short-term direction.
Gold lacks any intraday directional bias and trades between tepid gains and minor losses during the first half of the European session. At the time of writing, gold prices are hovering around the $ 1,730 region, virtually unchanged on the day.
Concerns that a third wave of COVID-19 infections and pandemic-related restrictions could delay the global economic recovery have offered some support to the safe-haven XAU / USD. However, a generally positive tone around equity markets, a stronger US dollar and a modest rally in US Treasury yields have limited the rise in dollar-denominated gold prices.
Looking at the technical picture, the XAU / USD has been hovering within a tight trading range for the past two weeks, barring the bullish move after the FOMC. Price action within a range constitutes the formation of a rectangular pattern on the 1-hour chart. This could still be classified as a bearish continuation pattern, marking a brief pause in the trend.
The negative outlook is reinforced by the fact that the XAU / USD has repeatedly struggled to find acceptance above the $ 1,742-44 resistance zone. That said, neutral technical indicators have not supported any firm short-term direction. This makes it prudent to wait for a sustained move in either direction before opening aggressive positions.
Meanwhile, the lower bound of the trading range, around the $ 1,720 region, could continue to act as immediate support. A convincing break below this level will firm up a bearish breakout and drag gold towards the round $ 1,700 level. The drop could extend further towards multi-month lows, around the $ 1,677-76 region touched earlier this month.
On the other hand, the $ 1,742-44 region remains a strong hurdle. A sustained breakout above this region, leading to further strength beyond range resistance around the $ 1,748 level, will be seen as a key trigger for the bulls. The XAU / USD could accelerate the move to challenge the strong break point of the horizontal support at $ 1,760-65.
This latest level coincides with the 200-period Simple Moving Average (SMA) on the 4-hour chart, which if decisively broken will set the stage for further gains. The precious metal could then break through an intermediate barrier near the $ 1,773-75 region and aim to regain the $ 1,800 level.
4 hour chart gold
Gold technical levels
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