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Gold prices are back under pressure after the latest US CPI report caused a major sell-off in precious metals as the US dollar index surged back into life and non-yield asset classes tumbled.
The yellow metal is under pressure because the expectation is now that interest rates may need to be raised even higher than expected. Thus, non-yielding asset classes are looking less and less attractive.
Should we continue to see the US dollar index moving to fresh highs we are likely to see gold slipping even further and moving closer and closer it yearly low, which is a technical danger zone.
According to technical analysis gold bears need to move the price under the $1,688 level to causes a technical meltdown. In summary, the technical battle is now in favour of sellers.
I would suggest that a break under the $1,688 level could trigger stop loss orders and we could see a big tumble towards the $1,650 level, which could spill even lower towards $1,600.
Current sentiment metric towards gold show that sentiment has risen since last week, which could hint an eventual bearish breakdown in the price of gold.
The ActivTrader market sentiment tool shows that 67 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
According to technical analysis gold remains under pressure while trading below the $1,750 level. This means that the short-term trend is bearish while the price remains capped under this level.
The current bear flag pattern shows that a move under the $1,700 level could cause a move of some $30.00. This would take the yellow metal back towards the $1,670 price area.
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Gold Medium-term Technical Analysis
The daily chart shows that the yellow metal is testing back towards the very lower end of its price range. A move under the range low could cause gold prices to move into a much-lower price range.
Looking at the double top pattern and the fact gold is in bear market, at a very minimum, we could see the price of gold moving the $1,500 level, or even lower around the $1,400 level in the medium-term.
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