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The price of gold has slumped back towards the $1,920 area following a hawkish FOMC minutes where Fed officials appear to reach a consensus at their March meeting that they would begin reducing the central bank balance sheet by $95 billion a month, likely beginning in May.
There also were strong indications that half-percentage point, or 50 basis point, interest rate increases are ahead. In this type of environment, it is very possible that gold is going to struggle in the near-term.
Repeated upside failure around the $1,950 area is certainly hinting that the short-term technical picture is worsening, and alongside the fundamentals, gold bugs should be braced for a rough ride ahead.
In terms of how low gold can go, and given the current inflationary environment, the situation is not dire, and I suspect the most gold is going to fall would be towards the mid-$1,800 region.
Current sentiment metric towards gold show that traders are becoming less bearish, which is not a good sign. The ActivTrader market sentiment tool shows that 43 percent of traders are bearish towards gold.
While this is a minor sentiment drop, it is mildly bearish for gold price that after retail have, in the majority, remained long towards gold during the bulk of the run up towards $1,950.
For me, the current sentiment bias towards gold suggest that gold can still fall some more, as the majority of traders aren’t that bearish towards the metal, which is typically a bad sign for further upside.
Gold short-term Technical Analysis
The short-term technicals for the yellow-metal show that a large head and shoulders pattern, which is technically bearish and could sparked further price losses in the yellow-metal.
Looking at the four-hour price chart, the size of the bearish price pattern is pointing towards a coming price correction due to its overall size and the $70.00 downside price projection.
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Gold Medium-term Technical Analysis
The daily chart shows that gold remains a strong buy while trading above the $1,880 level, after bulls rallied the price above a massive wedge pattern.
With the bullish breakout we could easily see gold price tackling $2,000 again. If the technical situation becomes worse under the wedge, I would expect that the price of gold could hit $1,850.
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