Gold price has continued to lose ground in the early European session on September 23 where it plunged to fresh six-week lows around $1,875. Worries about the second wave of the pandemic continued to boost the status of the US dollar which acts as the global reserve currency.
That, consequently, became a major factor that undermined the dollar-denominated commodity and some notable follow-through weakness for the third consecutive session on Wednesday.
Furthermore, the growing positive tone surrounding the equity markets further dented gold’s haven status. The slide also marked the fourth day of a negative move in the last five; and may further be blamed on some technical selling on a sustained weakness that has kept the precious metal below the $1900 horizontal support.
Based on a technical angle, gold appears to have confirmed a near-term bearish breakthrough a descending triangle in the hourly charts. Thus, some follow-through weakness back towards the August monthly swing lows; located around the $1,863-62 zone now seems to be a possible outcome.
Gold Price Movers
Market participants now turn to the upcoming release of the US Manufacturing and Services PMI flash version. That, together with the Fed Chair Jerome Powell’s second day of the congressional testimony is expected to influence the USD price dynamics. It might produce some meaningful trading opportunities near the non-yielding precious metal.
“The yellow metal remains undermined by the relentless haven demand for the US dollar seen across the board; as investors shun riskier assets amid coronavirus resurgence in Europe and the UK. US Federal Reserve (Fed) Chair Jerome Powell’s testimony and solid US housing data collaborated with the US dollar surge. Powell said the US economy remains resilient throughout the crisis.”
Renewed US-China tensions coupled with the Fed’s optimism are expected to boost the dollar while the $1863 August low is eyed. Trump said that China must be held accountable for mishandling the pandemic to which Chinese authorities dispute.
“The path of least resistance remains to the downside; as the bearish Relative Strength Index (RSI) probes the oversold territory at 31.17, allowing for more declines.”
Any recovery by gold may meet the immediate upside resistance located at $1901/02; where the pattern support now resistance coincides with the bearish 21-hourly Simple Moving Average (HMA). Further upwards, the next cap is located at the downward-sloping 50-HMA at $1913 which will then expose $1,920.
“Only a sustained move above the 100-HMA at $1931 could likely offer some reprieve to the XAU bulls in the near-term.”
Gold is currently extending its consolidation after a move to the $2075/80 zones in August. It seems to be going for a test of a cluster of notable supports that have formed at $1897/37. They include the 23.6% retracement of the rally from the 2018 low.
This zone is expected to hold to continue maintaining the sideways range. If the bears gain more momentum, a drop towards $1765 and potentially $1726 is possible. On the other hand, a move above $1,993 is needed for a possible surge to $2,075 to be considered.
A strong move above the $1,993 zone opens the way for a resumption of the core bull trend with some resistance seen near $2,175 and later $2,300.