Gold price is under heavy selling pressure as the correction from all-time highs accelerates despite weak risk sentiment. Gold investors ignored the rising number of new coronavirus infections in Europe and the further restriction measures in the UK and Spain and preferred the USD safe-haven.
The three days correction replicated the move in the markets during the coronavirus sell-off in March. Gold failed as a safe-haven asset during the March crash and failed again to attract bids during the Wall Street correction the last two weeks. Investors clearly prefer the USD and yen as safe-haven assets.
Recent economic data from the USA and Europe point to a slowdown in economic recovery, while a second lockdown will erase the hopes for a V-shaped recovery.
USD Drives Gold Price
The recent strength in USD pressured all dollar-denominated assets and gold. Hawkish comments from Chicago Fed President Evans yesterday further boosted the greenback. Charles Evans said that the Fed might raise interest rates before the 2% inflation target is reached. Investors focus today will be on the second day of Jerome Powell’s testimony in Congress. Markets want to hear that the Fed will inject more liquidity in the markets as concerns of a second lockdown rise.
Gold Price Analysis
Gold price trades to the lowest level since August 12, as the correction from record highs, accelerates below the 50-day moving average. Gold price returned below the 50-day moving average for the first time since June 8.
Now the technical outlook is bearish for the short term, and a test of the 100-day moving average looks possible. If the bears break that support, then the next target would be 1,795 the low from July 17.
On the flip side, gold price resistance is at 1,905 the daily high. Bulls need a credible break above the 50-day moving average at 1,940 in order to regain control. Next resistance would be met at 1,973 the top from September 16.