- Gold gained some positive traction on Monday, although it lacked subsequent buying.
- The technical setup favors the bears and supports the prospects for a further move to the downside.
- A sustained move beyond the $ 1,772-73 region could trigger a short covering bounce.
Gold has returned its daily recovery gains, remaining virtually unchanged on the day at time of writing around the $ 1,738 region. The initial rally stopped near the breaking point of the horizontal support at $ 1,760-65, which should now act as a key point for intraday investors.
New momentum in equity markets has weighed on demand for traditional safe-haven assets and limited the rise in the XAU / USD. This, coupled with a sudden spike in demand for the US dollar, has put some downward pressure on the prices of gold, denominated in dollars. The intraday decline could also be attributed to a modest rally in US Treasury yields, which tends to push money flows away from the yellow metal.
From a technical perspective, gold’s inability to capitalize on the upside and the emergence of some selling near support turned resistance favors bears. Furthermore, the RSI on the 1 hour chart has rebounded from the oversold territory and remains deep within the negative zone of the daily chart. This, in turn, suggests that the recent slump may still be far from over and adds credibility to the negative outlook.
A subsequent decline below the daily lows, around the $ 1,734 area, will reaffirm the bearish bias and pave the way for an extension of the recent negative move. XAU / USD could become vulnerable to accelerate the slide towards the eight-month lows around the $ 1,717 region that touched last Friday on its way to the round $ 1,700 level. Some continuation selling has the potential to drag the yellow metal towards the horizontal support at $ 1,675.
On the other hand, any significant positive movement beyond the $ 1760-65 region could still be seen as a selling opportunity. This, in turn, should limit the rally of the XAU / USD near the $ 1,772-73 area. That being said, a sustained force above this region could trigger a short hedging move and help the precious metal target a rebound to the $ 1,800 level. The next relevant resistance is near last week’s highs around the $ 1,814-16 zone.
Daily chart gold
Gold technical levels
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