The gold price has been a bit volatile in recent weeks recording an all-time high at $2,078 and then losing around 4.7% of its value in a single day. On August 20, gold (XAU/USD) experienced some aggressive selling which pushed it down to revisit its daily lows around $1,925. The drop was also blamed on the strengthening US dollar.
The US dollar encountered a fresh bid-wave across the board; after most of the major central banks announced that they would scale back dollar repos. They reached that decision as the current COVID-19 health crisis eases and the market tensions also ease.
Turning attention to gold, technically, the price has charted a probable head-and-shoulders formation on the hourly chart. An hourly close below the neckline that has formed at $1,924 will validate the forming bearish pattern.
The yellow precious metal is expected to see a fresh sell-off if the bulls do not succeed in defending the $1,924 barrier. The next support zone has formed at $1,900 below which the three-week lows of $1,863 come into the picture.
The hourly Relative Strength Index (RSI) remains bearish. However, the indicator is hovering just above the oversold zone; suggesting that there might be more room for a downside movement.
Any form of recovery attempts by gold will encounter strong resistance at the downward-sloping 21-hourly Simple Moving Average (HMA) at $1949. Any surge above the latter level will call for a test of the immediate hurdle that is located around a $1,970 region (horizontal 100 and 200-HMAs). The gold buyers may also target the 50-HMA resistance at $1978 thereon.
For now, everyone is watching the gold market awaiting the next price action to determine where it will go in the coming weeks.