- A combination of factors helps gold gain some traction on Wednesday.
- The rally lacks continuation and remains capped near the 200 hourly SMA.
- The technical setup favors the bears and supports the prospects for a further decline.
Gold is struggling to capitalize on the Asian session rebound from weekly lows and holds modest gains around the $ 1,730 region.
The prevailing sentiment of risk aversion has offered some support to the safe-haven XAU / USD. This, coupled with a certain drop in US Treasury yields, has further benefited the underperforming yellow metal. However, the underlying bullish sentiment around the US dollar has limited any significant rise in gold prices, denominated in dollars.
From a technical perspective, the intraday rally has faltered near the $ 1,735 confluence break point and supports prospects for a resumption of the previous downward move. The aforementioned region comprises the 200 hourly SMA and a short-term bullish trend line extending from the $ 1,677-76 region, at multi-month lows hit on March 8.
Meanwhile, the technical indicators on the daily chart have maintained their bearish bias and have not yet recovered from the negative territory on the 1-hour chart. This adds credibility to the short-term bearish outlook. Therefore, a subsequent decline below the $ 1,700 level, towards a retest of the multi-month lows, seems like a clear possibility.
Some continuation selling will be seen as a new trigger for the bears and will set the stage for a slide towards the intermediate support at $ 1,630-25. The XAU / USD could finally drop to test levels below $ 1,600 in the near term.
On the other hand, the breakout point of the trend line support, which now coincides with the resistance zone of $ 1,740-42, should act as immediate resistance. A sustained move above this region could trigger a short covering move and push the XAU / USD beyond the $ 1,750 level. That said, the positive move could still be seen as a selling opportunity and remain capped near the $ 1,765-60 area.
Gold 1 hour chart
Gold technical levels
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