The price of Gold continues to pullback after the recent Federal Reserve rate decision continues to help perpetuate the notion that inflation is easing, and the Fed rate hike cycle will continue to pause.
The yellow metal has started to weaken as traders await Fed Chair Jerome Powell’s latest thoughts. Powell will provide his semi-annual monetary policy report to Congress on Wednesday and Thursday.
This week the Fed is widely expected to repeat comments from his post-Fed meeting press conference, which had a hint of caution but still opened the door to higher rates down the road.
Market participants will be closely watching the testimony for any fresh clues on the timing of the rate increases. Should Powell strike a hawkish note, this could boost the US dollar and sink gold.
But if he is more downbeat and fails to provide fresh clues, this may weaken the greenback and lower yields, and maybe cause a safe haven to bid into the yellow metal.
Technically, the price of gold has been hugging the $1,930 level. In fact it is very visible that gold has in fact struggled to find new buyers lately, which is a really negative sign for gold bugs.
Going forward, it’s imperative that gold price moves back $2,000 or else we could see a steep drop back to the $1,900 support zone in the coming days and weeks.
Current sentiment metric towards gold shows that hints that this current price action is probably bearish, but a stepper correction may happen as the sentiment bias is getting severe.
The ActivTrader market sentiment tool shows that just 70 percent of traders are bullish towards gold. Going forward, we really need to see a much strong negative bias by retail to help the chances of a sustained rally.
Gold short-term Technical Analysis
According to technical analysis gold the price of gold has moved not below its 200-period moving average, meaning that the short-term price trend remains very bearish right now.
It is also noteworthy that gold has softened below the Ichimoku Cloud and unless we see a major rally above the $1,960 area then the trend is surely lower in the short-term horizon.
Gold Medium-term Technical Analysis
The daily chart shows that the yellow metal holds the Ichimoku Cloud. The most worrying thing for gold right now is that there is no support below the $1,920 level now.
We could see the price of gold making new lows after activating the head and shoulders pattern as depicted in the chart below. Gold could be very exposed below the $1,920 level and then move under $1,900 level with relative ease.
