Despite “risk-off” dominating the last few days on stock markets, gold has been weak and we have seen the Dollar recover, with the greenback inversely correlated with bullion and commodities. A major reason for gold’s weakness has been the sharp decline in stocks forcing some traders to close positions on gold to avoid margin calls on other losing trades.
From a technical point of view, the scenario is weakening for gold, but the price – so far – has managed to remain above the key support level of $1,850. In other words, we are still inside the huge lateral trading range of the last few months between $1,850 and $2,070. A clear fall below this level could generate quick declines with stop losses likely to be placed below this threshold. For the time being investors seem to be waiting for the outcome of the US presidential election next week and its consequences for financial markets before taking up strong positions.
