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Gold continues to correct lower and recent dip buying seems to have dried up and the US dollar strength from recent days has also contributed to the fall in gold price towards the $1,920 area.
Another reason why we have seen gold prices falling against the US dollar currency is because the Fed looks less likely to hike rates now than at any point over the previous two years.
Last week the Bank of England raised its main interest rate to 5% from 4.5%. This was the largest hike since February, bringing the rate up to the highest since 2008.
Norway’s central bank also hiked by 50 basis points last week. The Swiss National Bank raised its rate to 1.75% from 1.5% last week, further confirming the trend for central bank hikes.
Technically, the price of gold has been hugging the $1,920 level. In fact it is very visible that gold has in fact struggled to move under $1,950, this is a really bearish sign for gold bugs.
Going forward, it’s imperative that gold price move back above $1,880 or else we could see a steep drop back to the $1,810 support zone in the coming days and weeks.
Current sentiment metric towards gold shows that hints that this current price action is probably bearish, but a stepper correction may happen as the sentiment bias is getting more severe.
The ActivTrader market sentiment tool shows that just 62 percent of traders are bullish towards gold. Going forward, we really need to see a much strong negative bias by retail to help the chances of a sustained rally.
Gold short-term Technical Analysis
According to technical analysis gold the price of gold has stayed below its 200-period moving average, meaning that the short-term price trend remains bearish the $1,950 level, which is close to last week’s swing high.
It is also noteworthy that gold has invalidated a head and shoulders pattern and still has tremendous scope to move into a much higher trading range in future.
Gold Medium-term Technical Analysis
The daily chart shows that the yellow metal holds outside the Ichimoku cloud, which means that it is probably not wise to take a long trade as price movement outside the cloud is usually a bearish signal.
We could see the price of gold making a move next week to the downside, which could come quickly, however, a move under $1,880 could see gold tumbling towards the $1,850 to $1,800 area.
