Gold is gliding lower today, trading close to its lowest level since March 2023 and carrying on the bearish trend that kicked off on June 2, 2023. It is currently battling with the lower boundary of the recent trend channel and the May 10, 2023 downward sloping trendline. Gold had a quick look at the sub-1,900 area yesterday but quickly bounced higher, revealing pockets of resistance in this area.
The momentum indicators are somewhat split at this stage. The RSI remains below its 50-midpoint, confirming the current bearish pressure. In addition, the Average Directional Movement Index (ADX) has jumped to an extremely high level, reflecting the underlying strength of the current downleg, but also showing some initial signs that it is probably close to its peak.
Should the bears believe that the current pullback has not run its course, they would love a move below the critical 1,900 threshold. This appears to be the ultimate test of the bears’ determination and, if they are successful, they could then test the support set March 29, 2022 low at 1,890. Even lower, the February 6, 2023 low at 1,860 awaits them.
On the other hand, the stochastic oscillator is staging a small rally. This is pointing to a bullish tendency in the market that is not yet enough to halt the short-term bearish trend. Should the stochastic break its formed downward trendline, it would allow the bulls to make an attempt to recover part of their recent losses. They would quickly try to push gold above the 61.8% Fibonacci retracement of February 28, 2023 – May 4, 2023 uptrend at 1,909, before looking higher, and more specifically, at the 50-day simple moving average (SMA) at 1,922.
To sum up, gold is firmly in a short-term bearish trend, but the biggest battle for the 1,900 threshold has just begun.
