Gold fell steeply in the US session within minutes touching its lowest price levels since mid-July. The precious metal fell below the psychological $1840. It fell to $1838 but has managed to rebound slightly to trade around $1841 at the time of writing, translating to a loss of 1.63% within 24 hours.
The renewed US dollar strength and the risk-on market environment appears to be somewhat hurting gold. The latest data that was published by the IHS Markit indicated that the private industry’s business activity in the United States expanded at a fast pace in November.
The Services PMI and the Manufacturing PMI rose to 57.7 and 56.7 respectively. Both of these readings beat analysts’ estimates by a considerably wide margin.
Notably, the US Dollar Index (DXY), with the initial market reaction, remained depressed around 92 for most of the day; it surged sharply and erased most of its daily losses. Currently, the DXY was down only about 0.05% on the day pegged at 92.30.
In the meantime, representing the upbeat market mood, Wall Street’s main indexes continued to surge higher. For now, the S&P 500 and the Dow Jones Industrial Average are both up almost 1% on the day.
With this drop, the gold pair broke below the critical support that is located around $1,850 (Fibonacci 61.8% retracement of the June-August rally). A daily close below this level may cause the pair to drop lower toward $1,800, which is the psychological level/200-day SMA. Furthermore, the Relative Strength Index (RSI) on the daily chart is dropping toward 40, which confirms the near-term bearish outlook.
On the other hand, the upside movement is capped at $1850. This resistance area at $1850 is the nearest. If gold breaks that zone, the next resistance is located at $1876, which is the daily high.