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Gold prices trade at a three-week low today as August recovery losses steam due to the US dollar index hitting a five-week high overnight and fears over the Fed starting more aggressive rate hikes.
The buck is back at a 20-year high, which keeping the precious metals under pressure as they revert back to the downtrend which has been so prevalent during the course of this year.
Traders and investors are becoming increasingly concerned and risk averse amidst aggressive Federal Reserve action and the potential of a US economic recession this and next year.
Gold traders now eagerly await Fed Chairman Jerome Powell Friday morning on Friday as he speaks about monetary policy at Jackson Hole annual symposium in Wyoming, United States.
China is also in the news in regard to the slowing economy. The central bank of China, known as the PBOC cut its one- and five-year prime loan rates Monday, a move that was expected following the rate cuts last week.
Sentiment is also becoming more of a problem for the price of gold right now. The sentiment skew is getting more bullish, which is a negative force against a recovery in the price of gold this week.
Current sentiment metric towards gold show that traders are still bullish, although sentiment has dropped since last week. The ActivTrader market sentiment tool shows that 64 percent of traders are bullish towards gold.
Going forward, we really need to see a negative bias by retail to help the chances of a stronger rally. Current sentiment metrics may make it difficult for gold price to rally.
Gold short-term Technical Analysis
The short-term technicals for the yellow metal are worrying, as the price of gold has faced a huge rejection from the neckline of a head and shoulders pattern that has yet to meet its full upside price target.
Looking at the size of the bearish reversal pattern, at a very minimum, see the price of gold falling moving the $1,620 level, or even lower around the $1,480 level in the short-term.
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Gold Medium-term Technical Analysis
The daily chart shows that gold has tested back towards its trend defining 200-day moving average and just like the head and shoulders patter, large scale price failure has occurred.
Should we see the $1,700 level a major price breakdown could occur. I think at a very minimum over the medium-term a move towards the $1,480 level. Bulls beware if the price moves under $1,700.
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