On Tuesday, XAU/USD, the gold against the U.S. dollar trading pair, experienced a dramatic drop. It was able to rally back and gain ground slightly. The price dropped all the way down to near the $4,080 support before bouncing back up to the current trading price of around $4,110. This drop represents significant declines for XAU/USD in the overnight American afternoon trading session.
XAU/USD rate is trapping trading well below the 20-day Simple Moving Average (SMA). This drop in the SMA indicates that a bearish trend is forming in the short term. Both the 100-day and 200-day SMAs for XAU/USD remain bullish, with strong, positive slopes. In fact, they continue to be situated under the present price level. In particular, the 100 SMA is currently at $4,043, indicating a possible base of support while traders gauge market conditions.
Technical indicators for XAU/USD show an ever stronger oversold condition, still showing very strong downward momentum. If this trend continues, even more deeply discouraging declines will be coming shortly. Look out, the analysts are saying that XAU/USD could fall further, even hitting the psychological $4k level. Support levels are at $4,105.10, $4,081.70, and $4,065.90, with resistance at $4,134.45, $4,148.30, and $4,162.60.
XAU/USD plunged like a rock on Tuesday. This drop means a correction, prompted by a better sentiment in the broader market. Investor optimism has risen, placing a downward force on gold prices. This is surprising as gold is traditionally considered a safe haven asset in times of uncertainty. Next Friday, we’ll see new Consumer Price Index (CPI) data released by the U.S. This release will likely have a huge impact on market sentiment and gold prices.