Gold Price Drops Sharply to Support at $1,600.00. Will It Hold?

gold price
gold price

Gold Price to Bounce Off Trend Line Support?

On Friday, gold price dropped sharply from its opening price of $1,643.83 to an intraday low of $1,562.28. By the end of the New York session, XAUUSD had settled at $1,585.22. Friday’s price action may have been driven by profit-taking. Remember that gold price rose to multi-year highs on the back of fears surrounding the coronavirus outbreak. Friday also marked the last trading day for the month of February and investors tend to re-balance their portfolios ahead of a new month. The better-than-expected Chicago PMI may have also helped push XAUUSD down. It printed at 49.0 and topped the forecast at 46.1.

The daily time frame reveals that the precious metal fell to a critical support level. By connecting the lows of December 13, December 23, and February 5, we can see that gold price is testing support at the rising trend line. This price, around $1,600.00, also previously served as resistance on January 8 and February 3. If today’s candlestick closes as a reversal candle in the form of a doji, shooting star, or even a spinning top, we could soon see XAUUSD rally to its recent high at $1,689.14.

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Or Will Resistance at the Fib Levels Hold?

On the other hand, the 4-hour time frame reveals a more bearish setup. The long-term rising trend line already looks to have been broken. By drawing the Fibonacci retracement tool from the high of February 24 to the low of February 28, one could argue that the uptick in gold price in this morning’s Asian session is nothing more than just a pull back. The area between the 23.6% and 38.2% Fib level also coincides with the 100 SMA. XAUUSD could find resistance at this price level at the $1,600.00 psychological handle. A break of today’s lows at $1,562.73 could mean that gold price may soon fall to support around $1,550.30.

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