Gold reverses and drops to test $1220
|- A stronger US dollar pushed gold prices to the downside.
- The yellow metal dropped from weekly highs to test the $1,220 area.
Gold prices moved with a bullish bias until the beginning of the American session. Price peaked at $1,228, the highest since November 7 and then turned to the downside. It pulled back and during the last hours accelerated the decline.
It erased daily gains and recently printed a fresh daily low at $1,219.80. As of writing, trades at $1,221 holding a bearish tone but holding so far above $1,220 and also on top of yesterday’s low at $1,217.90.
The retreat in gold took place amid a rally of the US dollar across the board and also on the back of a risk-off mood. Equity prices in Wall Street are falling sharply while crude oil prices are losing more than 4%.
XAU/USD Technical outlook
Gold remains confined to a tight range and with the upside still looking limited despite the latest recovery, as in the daily chart, a flat 20 DMA continues limiting advances, point out Valeria Bednarik, Chief Analyst at FXStreet. “The Momentum indicator in the daily chart aims north around its 100 level, while the RSI lost its upward strength after reaching neutral territory, now turning lower.”
She explains that in the shorter term, the 4 hours chart, shows the price barely holding above a bullish 20 SMA which converges with a mild bearish 100 SMA, as the Momentum heads nowhere right above its 100 level and the RSI retreats, now heading south around 55, all of which indicates limited buying interest.
To the downside, support levels could be seen at $1,213, $1,203 and $1,191. On the flip side, resistance might lie at $1,22 followed by $1,234 and $1,243.
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