Gold prices continued to decline this week, falling below the critical $3200 mark as optimism surrounding a potential US-China trade deal bolstered risk appetite among investors. We have seen a significant break down in the gold’s short-term support on account of this change in sentiment. Consequently, short-term sentiment for gold has become pessimistic.
The gold price is under siege at the moment. This would be bearish, as it has already dropped below the broken Fibonacci 50% retracement at $3228. This level has recently been the site of many attempted violations. One would expect significant defensive strength at this level. Earlier on this week, gold reached daily highs of around $3265. Yet this level was too hard of a wall for gold to break through, and it has fueled the bearish bias among traders.
On Thursday, gold prices broke below key support lines. This decline indicates that we may indeed be seeing a deeper pullback from the all-time high of $3500 just achieved. Analysts aren’t happy with the break below the $3200 level, as it’s a critical break that completes a bearish failure swing pattern. Next possible support is at $3164, then $3126, $3100 and finally $3084. That means deeper declines could occur in the near term.
Technical indicators are showing a bearish shift in momentum for gold, with the 14-day momentum continuing its drop into negative territory. The gold price is currently trading below its 10, 20 and 30-day moving averages. All of these averages have now bear crossed. These technical indicators suggest that unless there is a substantial reversal in sentiment, gold may struggle to regain its footing.
Upside resistance is still strong at $3200 and $3228 while key resistance above that is at $3265 and $3292. Investor optimism over a US-China trade accord is clouding investor priorities. This has caused them to pull back from safe-haven assets such as gold and look for higher risk opportunities in the equity markets.