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Gold is starting to move lower as the US dollar gains strength and data showed US retail sales grew much more than expected in January, hurting the yellow metal.
The latest retail sales data, coupled with stronger-than-expected CPI inflation numbers for the month, plus concerns that inflation will remain in place, giving the Fed the green light to raise rates this year.
Gold prices have consolidated a bulk of their recent gains on these fears, as markets began dialling back bets that the Fed could potentially pivot this year. The central bank has so far maintained its hawkish rhetoric.
Basically, the prospect of rising interest rates bodes poorly for the yellow metal and its non-yielding peers, as the opportunity cost of holding such assets increases.
In the near-term gold has turned bearish, however, dip-buyers could be rewarded for their patience if they await a pending drop towards the $1,800 support zone, which could be a great entry point.
Technically, I would suggest keeping a close eye on gold’s 200-Day SMA. This could be the area to start to accumulate gold if a much-deeper price correction happens over the next few days.
Current sentiment metric towards gold shows that sentiment has become slightly more bullish, which hints that retail are leaning against this current price correction.
The ActivTrader market sentiment tool shows that 57 percent of traders are bullish towards gold. Going forward, we really need to see a strong negative bias by retail to help the chances of a sustained recovery.
Gold short-term Technical Analysis
According to technical analysis gold the price of gold has moved lower after breaking under its 200-period moving average and this is confirmation that gold has turned short-term bearish.
It is also noteworthy that a negative force is close to ending as bearish RSI divergence has been reversed and the RSI indicator has approached extremely oversold price conditions.
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Gold Medium-term Technical Analysis
The daily chart shows that the yellow metal has moved back inside its two-year range and more importantly could test back towards its 200-day moving average, around the $1,775 area.
We could see the price of gold revisit the $1,1775 level, which could be a strong spot to accumulate gold for a target of $2,000. If $2,000 is broken then the sky could be the limit for gold.
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