Gold prices dropped for the second consecutive day. The second, of course, is the important $3300 to $3292 support range which they’re once again testing. This space has provided an important psychological marker. It coincides with the Fibonacci 38.2% retracement of the recent rally, during which time prices soared from $2956 to $3500. The continued testing of this critical support level indicates market indecision as investors weigh competing forces affecting gold’s near-term trajectory.
This week in trading gold has repeatedly tried to clear the $3300/$3292 area. Every single effort has failed. Two gigantic, equally powerful, and directly opposing forces are influencing the market sentiment today. Taken together, this dynamic would suggest a longer than typical consolidation period ahead for gold prices. Receding trade tensions between the United States and China have ignited a global risk-on repricing. The worry regarding the long-term effects of the tariff war currently being waged throughout the world, not just between the United States and China, on the overall global economy remains.
First gold prices must clear 10-day moving average (DMA) located at $3,337. This breakout is very important for stabilizing prices at higher levels and eliminating some near-term downside risk. A movement like that would suggest a short-term alleviation in bearish forces. If gold breaks up over the upper pivots at $3371 and $3400 it will mark the conclusion of the current corrective phase. If successful, this step could be the beginning of a firmer price floor.
Gold faces important resistance at $3292, $3300, $3328, and $3336. On the flip side, if prices continue to drop, we see our first major support level at $3260, then at $3245, $3228, and finally at $3200. An eventual even minor loss of the critical $3300/$3292 support zone would create at least preliminary but robustly negative signal for gold. Traders and investors alike should keep a keen eye. A decline underneath the $3228 mark would thereby affirm the 50% retracement and the 20-day moving average, strengthening a bearish view.
With global economic indicators still bouncing around amid the ongoing trade negotiations, investor outlook on the big picture for gold is unclear. Financial market participants have long observed that reducing trade tensions is effective in producing a one-day relief rally in risk sentiment. Yet worries over the lasting impact of these clashes on international markets continue to overshadow investor optimism.