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Gold is starting to turn lower on Tuesday after failing to break above the $2,000 level on Monday, as the early risk-off market sentiment theme quickly reversed as Wall Street ended up trading lower.
Gold benefitted on Monday from a bombing in Libya, the worsening Ukraine conflict, and the Covid pandemic continues to surge in China, which has once again been a big worry for the market.
The recent rejection from the $2,000 level does not bode well for the yellow metal, as this was a must pass area to maintain the upside price momentum from the previous trading week.
If gold fails to move above the $2,000 level this week the technical shows that the yellow metal could turn very bearish in the short-term and test towards the $1,800 level before recovering again.
Precious metals traders need to pay close attention to the speak from FED Chair Powell this week, which is likely to set the market tone, alongside the ongoing newsfeeds from China and Russia.
Current sentiment metric towards gold show that traders are becoming undecided towards the price of gold. The ActivTrader market sentiment tool shows that 50 percent of traders are bearish towards gold.
While there is no sentiment bias, it is mildly bullish for gold price that after retail have not gone too crazy on the buy side, which could hint at more range bound trading action ahead.
For me, the current sentiment bias towards gold suggest that gold can still remain range bound as the majority of traders aren’t that bearish towards the metal, which is typically is not a bad sign for further upside.
Gold short-term Technical Analysis
The short-term technicals for the yellow-metal show that a large amount of MACD divergence has formed, 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 divergence is pointing towards a coming price correction due to its overall size and the $40.00 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 $1,980 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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