Where Did You Gold? – Gold Bears Break Through Key Support, Bulls in For A Tough Fight

Gold continues its downward trend, and the price currently stands at $1,763.30. It is trading well below its 50-day Simple Moving Average (SMA), with the Moving Average Convergence Divergence (MACD) also showing a bearish reversal. It spent the most part of yesterday trading below its 10-day and 50-day SMA. In tandem, the Relative Strength Index has also dipped and seems to be on its way to an oversold condition. At present, it stands at 40. Meanwhile, the current price of spot gold is $1,780.

Source: Yahoo Finance

Anil Panchal, an analyst from FX Street reported the formation of a Doji candle spotted on the charts, a key sign of uncertainty. However, in the tussle of the bears versus the bulls, the bears have then breached a key support level of $1,765. For the bulls to take back the reins, they will need to face key resistance of $1,785 (which is the February low) and $1,800.

The gold bulls have suffered upon release of positive U.S. data this week, such as the January Retail Sales which beat forecasts spectacularly. Furthermore, the release of the Federal Open Market Committee (FOMC) minutes reported “a considerable stronger outlook for 2021 relative to the December forecast.” Both of these positive updates were catalysts to increase positive optimism in the market, giving strength to the USD.

However, as the USD bulls gained strength, the gold bulls, unfortunately, began losing theirs, as the prospect of things gradually returning to normal.

In the famous movie Forrest Gump, the main character, Gump, said these famous lines, “stupid is as stupid does”, which means that a person should not be judged by his appearance, but rather by his actions. Likewise, how would normal look like in a world that has been altered by the pandemic? Although recent data might indicate that a sense of normalcy is beginning to appear, it is also to be noted that the latest initial jobless claims came in at 861,000, which was a 13,000 increase from the previous week.

As Gump points out the flaw of only looking at how things appear, should there be something deeper than the markets need to be watchful for and could there be hope yet for the gold bulls? Only time answer that question. In the meantime, let's keep our eyes here.

XAU/USD (as of Feb 19, 2021, 10.30 a.m., GMT +8) - $1,763.30

FOLLOWME XAU/USD User Sentiment (as of Feb 19, 2021 at 10.50 a.m.)

Short – 45.36%

Long – 54.64%