Gold extends reversal and drops to test $1200
|- Gold reversed sharply after trading momentarily above $1210, trimming weekly gains.
- Price fell to test the $1200 area and the 20-day moving average.
Gold rose earlier to the highest level in 2 weeks at $1,212.50/oz but was unable to hold on to gains and reversed sharply during the US session. It fell constantly and near the end, it was hovering slightly above $1,200 moving with a bearish tone.
XAU/USD peaked after the release of US inflation data but then reversed, amid optimism about the US economy and expectations that the Federal Reserve will continue with its interest rate hike plans. The move lower during the American session took place amid a rally in USD/JPY. The greenback ended mostly lower across the board but posted strong gains versus the yen.
Technical outlook
“The metal is barely holding above the 1,200.00 level, and reentering the daily ascendant channel that broke yesterday, erasing the relevance of yesterday's breakout. In the daily chart, the price is now a few cents above a flat 20 SMA, the Momentum indicator continues advancing modestly below its 100 level and the RSI turned lower, now at 49, offering a neutral stance”, says Valeria Bednarik, Chief Analyst at FXStreet.
In the short term according to her, the 4 hours chart shows price barely holding above a congestion of directionless moving averages and technical indicators gaining downward traction but above their midlines. “Chances will lean to the downside on a clear break below the 1,200 figure.”
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