|

Gold Price Forecast: Below $1,300 as expected, what's next?

Gold is currently trading at $1,292 per Oz – down 2.66 percent on the week, its biggest weekly loss since May 2017. 

The yellow metal is also down 1.53 percent on the day – the biggest single-day drop since August 2015. Further, it is closing in the red for the third straight day - the longest losing streak since Nov. 27. 

More importantly, at press time, it is down 4 percent from the recent high of $1,346. 

The drop to $1,300 was expected, as discussed on Feb. 28. After all, XAU had established a bearish lower low pattern with a close below $1,321 (Feb. 21 low) on Feb. 27.  

While technical selling seems to have played a big role in pushing the metal lower, the break below $1,300 seems to have been fueled by an uptick in the US dollar - gold's biggest nemesis. 

As of writing, the dollar index (DXY), which tracks the value of the greenback against majors, is trading 0.30 percent higher on the day but is flat lined on weekly basis. 

On the weekly chart, however, it has created a long-tailed doji – a sign of dip demand. 

What's more, EUR/USD has created a candle with long upper shadow for the second day, marking fourth straight rejection at 1.1407 (61.8% Fib R of 1.1514/1.1234). Therefore, the pair could remain under pressure next week and the resulting broad-based USD strength would only add to the bearish tone around the zero-yielding safe-haven metal. 

Technical charts are also pointing to deeper losses, albeit after a minor bounce. That said, the yellow metal could pick up a strong bid, irrespective of dollar strength if Indo-Pak tensions escalate to full-blown war.

Daily chart

On the daily chart, gold has dived out of the ascending trendline and the breakdown is backed by a bearish crossover of the 5- and 10-day moving averages (MAs).

The 14-day relative strength index (RSI) has also dropped below the support at 54.88 and is now reporting bearish conditions with a below-50 reading. Meanwhile, the moving average convergence divergence (MACD) histogram is losing altitude below the zero line, signaling the bearish momentum is gathering steam. 

As a result, a deeper drop toward the next major support at $1,276 (Jan. 24 ) could be in the offing. 

That said, RSIs on the hourly and 4-hour charts are reporting oversold conditions with a below-50 print. Hence, prices could see a minor bounce to $1,300 or higher.

The outlook, however, will remain bearish while prices are held below the descending (bearish) 10-day MA, currently located at $1,323 (and seen sloping lower to $1,318 next week). 

Author

Omkar Godbole

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

More from Omkar Godbole
Share:

Editor's Picks

EUR/USD holds firm above 1.1900 as US NFP looms

EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage. 

GBP/USD remains above nine-day EMA near 1.3650

GBP/USD recovers its recent losses from the previous session, trading around 1.3680 during the European hours on Wednesday. The technical analysis of the daily chart indicates a sustained bullish bias, as the pair trades within an ascending channel pattern.

Gold sticks to gains near $5,050 as focus shifts to US NFP

Gold holds moderate gains near the $5,050 level in the European session on Wednesday, reversing a part of the previous day's modest losses amid dovish US Federal Reserve-inspired US Dollar weakness. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal ahead of the critical US NFP release. 

US Nonfarm Payrolls expected to show modest job gains in January

The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls data for January on Wednesday at 13:30 GMT. Investors expect NFP to rise by 70K following the 50K increase recorded in December.

S&P 500 at 7,000 is a valuation test, not a liquidity problem

The rebound from last week’s drawdown never quite shook the sense that it was being supported by borrowed conviction. The S&P 500 once again tested near the 7,000 level (6,986 as the high watermark) and failed, despite a macro backdrop that would normally be interpreted as supportive of risk.

Bitcoin price slips below $67,000 ahead of US Nonfarm Payrolls data

Bitcoin price extends losses, and trades below the lower consolidating boundary at $67,300 at the time of writing. A firm close below this level could trigger a deeper correction for BTC. Despite the weakness in price action, institutional demand shows signs of support, recording mild inflows in ETFs so far this week.