Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Gold: Bears Lunge At $1800 Support As Rally Fades

By Investing.com (Barani Krishnan/Investing.com)CommoditiesNov 23, 2021 10:05
ng.investing.com/analysis/gold-bears-lunge-at-1800-support-as-rally-fades-97633
Gold: Bears Lunge At $1800 Support As Rally Fades
By Investing.com (Barani Krishnan/Investing.com)   |  Nov 23, 2021 10:05
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

It lasted a month but gold in $1,800 territory now looks increasingly vulnerable, with bears appearing set to attack the base support for the perch.

It’s a dramatic reversal of sentiment by traders of the yellow metal. Just a week ago gold seemed to be on its strongest march yet toward reprising June’s peaks of $1,900 an ounce, or even the August 2020 record highs of above $2,000.

Monday’s $45-drop, or 2.4% loss, was the largest since Oct. 22 when bullion decisively entered the $1,800 patch with daily price action that did not fall below that mark.

Gold Daily
Gold Daily

All charts courtesy of skcharting.com

Most importantly, for almost 10 days in a row—between Nov. 10 and 19—gold did not leave the mid-$1,800 level, and even posted a June high of $1,879.35 at one point. That all these occurred while its twin rivals—the dollar and Treasury yields—were also rallying spoke volumes of the most recent gold rally.

So, Where’s Gold Fundamentally Now?

Gold should remain at just where it’s cresting now—between $1,800 and $1,820 —and slowly rebuild itself for a return to mid-$1,800 levels.

But the likelihood of it surviving and enduring in $1,800 territory might be thin given the deliberate attack to end its upward momentum. 

There was little reason for Monday’s dump, since the US inflation theme that the gold rally had been riding is still red-hot. 

The renomination of Jerome Powell by President Joseph Biden as Federal Reserve Chairman was cited by some as reason, after the relief rally in banking stocks on the Dow that came at the expense of safe havens that include gold. 

But the dollar’s rally on speculation that Powell might now raise rates faster—by the first quarter of 2022 versus the last two quarters that had been expected earlier—was as ludicrous as the dump in gold. 

The greenback was near a 4-½ year top against the yen on Tuesday on the notion that Powell might turn into a fiscal hawk, having secured his job for another four years. 

Anyone who has studied the Fed chief over the 20 months of the pandemic will know that there can not be a greater policy dove than him, regardless of what the fed funds indicator on rates says. Powell’s the creator of the “transient inflation” mantra and will probably not change his spots till he goes. So, if there was a reason to sell gold on his renomination news, there was as good a reason to dump the dollar.

What Is The Technical Outlook For Gold Then?

It certainly isn’t as pretty as it was a fortnight ago, say those in the charting game.

“We may be on the cusp of another fresh near-term trend,” said James Staley, a gold strategist who blogs on DailyFX.com.

“At this point, today’s lows are holding around a spot of prior resistance, taken from around the $1,808 level on the chart.”

Staley said the prior zone of potential support, taken from previous resistance around the $1,834 handle, remains as possible lower-high resistance. 

“But, if sellers are aggressive enough to post a new bearish trend, they may not be willing to wait around for a re-test of $1,834. In that case, another spot of possible resistance can be scoped out around the $1,821 level of prior swing support.”

Staley said the bigger question behind the most recent bear flag in gold is whether it can lead to another test of the $1,680 level and, perhaps more importantly, a breach beyond that barrier of support. 

“That zone around $1,680, which is confluent with the 38.2% Fibonacci retracement of the 2018-2020 major move, has been tested thrice already in 2021, including the double bottom formation that had built in March and April.”

“On the way down, there’s another spot of potential support around $1,771, which is the 23.6% retracement from the same Fibonacci study from which the 50% marker helped to set current resistance.”

Gold Weekly
Gold Weekly

Sunil Kumar Dixit, chief technical strategist for skcharting.com who regularly charts commodity technicals for Investing.com, says gold’s path of least resistance seems lower—though Monday’s collapse could trigger some upward correction too in the near-term.

“The sharp $46 drop took support at the 200-Day Simple Moving Average of $1,802 and settled at the 50-Day Exponential Moving Average of $1,809,” said Dixit. 

Gold Monthly
Gold Monthly

He added that with Monday’s settlement, the main stochastic signal line read 9.20, while the slow stochastic line was indicated at 11.90. 

“Combined, these make gold oversold and a consolidation above $1,800 or a better move above the 50-Day Exponential Moving Average of $1,809 can trigger a recovery to the 38.2% Fibonacci level of $1,825 and horizontal static support-turned-resistance of $1,833.”

Also, consolidation above the $1,833 level, with volume support can extend recovery to pivot to $1,845 and the 23.6% Fibonacci level of $1,860, Dixit said.

But if the bears got their claws on gold forcefully, then few of those recovery targets might pan out, he said.

“Considering the violent long unwinding, the recovery may succumb to bearish designs.”

“Rejection at (or failure to reclaim $1,825-$1,833) can push gold down again to the 200-Day Simple Moving Average of $1,802, which is acceleration point to support clusters that are at the 50% Fibonacci level—precisely $1,795 and the 100-Day SMA of $1,790, or even the 100-week SMA of $1,785.”

Before concluding, I will remind you that while the trend is your friend, you should remember to temper your trades with moderation.

Good luck.

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.

Gold: Bears Lunge At $1800 Support As Rally Fades
 

Related Articles

Shaun Downey
Gold Breaks Down Monday   By Shaun Downey - Nov 29, 2021

Highlights for the week: Stock markets collapse Friday This causes buying of the EuroDollar Gold Fails at daily resistance Friday Gold and silver get no benefit from dollar...

Gold: Bears Lunge At $1800 Support As Rally Fades

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email