- Gold sees some new selling on Wednesday and returns the modest gains of the previous day.
- The setup favors the bears and supports the prospects for an extension of the slide.
- Sustained weakness below the $ 1,850-48 region will add credibility to the negative outlook.
Gold is extending its intraday retracement decline from the $ 1,884-85 region and has fallen to fresh daily lows at the start of the American session. The precious metal has now returned the modest recovery gains of the previous day. At the time of writing it remains negative near the $ 1,860 level.
The emergence of some new selling on Wednesday supports the prospects for an extension of this week’s sharp pullback from the $ 1,965 resistance zone. That said, bears could still wait for sustained weakness below the horizontal support at $ 1,950-48 before opening new positions.
The mentioned region coincides with the monthly lows for September. Should they break below decisively they could lead to some aggressive technical selling. Meanwhile, technical indicators on the daily chart have started to drift into bearish territory and lend credence to the negative outlook.
Therefore, the XAU / USD now looks vulnerable to accelerate the decline towards intermediate support near the $ 1815-10 horizontal zone. Momentum could drag the precious metal below the round level of $ 1,800 to challenge the 200-day SMA, near the $ 1,782-80 region.
On the other hand, the $ 1,880 level now appears to act as an immediate resistance and is closely followed by the highs of the previous day, around the $ 1,890 level and the round $ 1,900 level. Only a sustained move above such barriers could nullify the bearish setup and trigger a short covering bounce.
Daily chart gold
Credits: Forex Street
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