Gold is starting to move back towards the $1,900 support level after a false upside move towards the $1,950 last week, which can be categorized as a failed attempt to regain the $2,000 level.
The yellow metal may need to go much lower before it starts to head higher again in order attract strong buying interest for another key technical test of the psychological $2,000 level.
Perhaps the clue to where gold heads next is found on the price chart, and the former key breakout zone where gold first starting to ramp higher towards its recent multi-month high, at $2,060.
Looking at the daily chart, the key breakout zone this year was located around the $1,810 level. This is also the location of the yellow metals trend defining 200-day moving average.
After key breakouts we often see the asset class in question return to the scene of the break, or the scene of the crime. In trading we typically call this a key technical retest. This is what we could see with gold.
Current sentiment metric towards gold show that traders are becoming less bullish towards gold. The ActivTrader market sentiment tool shows that only 62 percent of traders are bullish towards gold.
While this is a minor sentiment drop, it is slightly bullish for gold price that after retail are feeling less bullish towards gold prices. Therefore, we may see a negative sentiment starting to emerge of this continues.
For me, the current sentiment bias towards gold suggest that gold can still fall somewhat, as the retail crowd may eventually flip to wholesale bearish if gold corrects lower.
Gold short-term Technical Analysis
The short-term technicals for the yellow-metal show that a large head and shoulders pattern has been formed, which is technically worrying, but not conclusive on the bear front by any means.
Looking at the four-hour price chart, the Ichimoku indicator shows that gold is moving through thick cloud resistance. I suggest keeping a close eye on the $1,923 area in the short-term.
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Gold Medium-term Technical Analysis
The Ichimoku indicator on the daily chart shows that gold remains a strong buy while trading above the $1,810 level, which is critical trendline support and must defend area.
With the bullish breakout above the trendline underway we could easily see gold price tackling $2,000 again. Bulls may need to this area tested before gold starts to rally again.
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