Intraday recovery by the greenback after upbeat Existing Home Sales and Markit Flash Manufacturing and Services PMI data have served as the catalysts for the drop in gold prices for the day. After last week’s substantial correction following the surge in gold prices the week before, gold prices look as though they are in for another bearish close for the week.
Gold price on the XAUUSD charts shed weight to fall to one-week lows within the last hour but bounced off quickly off these lows as strong US Dollar demand. However, risk sentiment remains weak and sliding US bond yields have helped to provide some intraday support to the yellow metal. Sentiment around the yellow metal remains bullish, but this is now being called into question as the technical setup on the charts has started to show signs of bullish exhaustion.
Gold price on the spot market now stands at 1934.93, off intraday lows of 1911.70 as gold trades 0.68% lower.
Technical Outlook for Gold
The gold price chart on the daily time frame shows that an ascending support trendline which connects the lows from 5 June to date, and this line intersects the 1900.76 support level, very close to the 61.8% Fibonacci retracement line that served as support to last week’s correction. The recent price action of the last four weeks shows lower highs; a sign that bullish momentum may be exhausted.
If selling pressure mounts and takes gold price below the 1900.76 support line, this would open the door towards the 1869.39 support as the initial target, as this move also takes out the ascending trendline support. A further decline brings 1821.61 (88.6% Fibonacci level) into the picture, with 1788.90 even in the running if the decline is extensive.
On the flip side, a decline in risk sentiment and further flight to safety is required to allow gold price to push up from current support levels. This scenario provides for bulls to attempt a push towards 1980.74 initially, then 2008.04, 2050 and 2073.44, in that order. However, some follow-through buying that takes price above 2008.04 may be needed before pushing towards higher levels.
Gold Price Chart (daily)