Gold is under technical pressure as the drive higher in the US dollar index continues to cause an outflow of yellow metal buyers, and an influx of new bulls entering the greenback long trade.
The scale of the losses last week in gold and the precious metals market in general, was significant. The price of gold has lost over 5 percent of its value over the past four trading weeks.
I think the technicals look bleak for the yellow metal and we could easily see further losses under the $1,700 level now that the technically important $1,790 support level has been cleared by bears.
This week it is all about the $1,680 level in terms of the technical. This is a former key swing low and an area of extreme technical importance. Make no mistake, this is a severe make-or-break level for gold.
The sentiment is also a huge problem for the price of gold right now. The sentiment skew is getting more extreme, which is a big negative force against a recovery in the price of gold this week.
Current sentiment metrics towards gold show that traders are getting more bullish, and sentiment has not since last week. The ActivTrader market sentiment tool shows that 72 percent of traders are bullish towards gold.
With the sentiment bias now higher, retail is wrong, and increasingly the majority is on the wrong side of the trade. Going forward we really need to see a negative bias by retail to help the chances of a stronger rebound.
Gold short-term Technical Analysis
The short-term technicals for the yellow metal are really bearish, and as you can see by the attached chart, a huge triangle breakout has taken place. The downside could be significant.
Looking at the size of the triangle breakout we could, at a very minimum, see the price of gold falling towards the $1,680 level, or even lower around the $1,630 level in the short-term.
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Gold Medium-term Technical Analysis
The daily chart shows that gold could be about to test towards the bottom of its price range. As you can see the top of the range is basically $2,050, while the bottom is $1,680.
A break under the range would be a huge problem for gold and would indicate that a $300.00 down move could happen. It is very important that the price of gold starts to rebound now.
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