Gold suffered a major market sell-off last week after the much stronger than expected 900,000 plus US Non-farm payrolls job report and ultra-low 5.4 percent unemployment rate caused markets to believe that FED will taper QE towards the end of this year.
The brutal sell-off in gold accelerated towards the $1,680 level after gold broke under the $1,750 level, making this area a key rebound or sell swing point to watch out for this week if the yellow-metal can get off the floor.
News surrounding the US infrastructure bill and also the US CPI inflation report are likely to drive the overall direction of gold although it should be noted that a new bullish narrative for gold will need to emerge to stop a further sell-off towards the $1,680 price region again.
In particular the $1,685 level is an important level before this is a key former swing-high for gold and the key breakout area last year when gold broke into a trading range between the $1,700 and $2,000 levels.
Sentiment is offering a huge red flag for further losses this week as bullish sentiment was actually increasing during Friday’s epic sell-off below the $18.00 level. This speaks to the fact that traders could be in for a short squeeze and are trapped from higher levels.
The ActivTrades market sentiment tool shows that 78 percent of traders are still bullish towards gold. This is a notable ten percent increase since after the payrolls release and also it is a major bearish signal.
Gold short-term Technical Analysis
The short-term technicals for the yellow-metal shows that a major range breakout has taken place following the move under critical technical support, around the $1,780 level.
Looking at this week the $1,730, $1,710 level are the big support levels to watch prior to the former key swing low, at $1,680. A break under the $1,680 level and gold will be on a very sticky wicket.
Gold Medium-term Technical Analysis
According to the daily time frame, gold has broken under a narrowing triangle pattern, which again suggests that a big directional of around $100.00 is currently in progress.
The triangle pattern does suggest that gold could go as low as $1,650, however, it is likely that the news surrounding the infrastructure bill and COVID-19 will be the major narrative for gold bulls to focus on this week in regard to whether a recovery will or can begin.