- Gold’s path of least resistance is to the downside.
- Coronavirus vaccine progress-led risk-on to weigh.
- Technical setups remain in favor of sellers.
- All eyes on a raft of US data and Fed minutes.
Gold (XAU/USD) is holding onto the critical $1800 support so far this Wednesday. The yellow metal is set to extend the bearish momentum, in response to the shift in the market’s perception towards the riskier assets. Attention turns towards a batch of critical US economic data and FOMC minutes due on the cards later in the day for fresh cues.
The underlying theme hinges on the expectations of a quicker global economic recovery from the pandemic blow, thanks to rapid development in the coronavirus vaccines on both sides of the Atlantic. Meanwhile, strong US Markit Manufacturing and Services PMIs released earlier this week added credence to the upbeat outlook on the economic rebound, which calls for lower demand for additional monetary and fiscal stimulus, eventually exacerbating the pain in the precious metal.
Markets also cheer the easing US political uncertainty after President-elect Joe Biden kicked-off his White Transition and put at rest the odds of a contested election. The Wall Street stocks rallied to record highs on the dual optimism and downed the demand for the non-yielding gold.
Gold Price Chart - Technical outlook
The short-term outlook for gold remains bearish, as depicted by the technical charts on different timeframes.
Daily chart
Looking at the daily chart, the price stalls its recovery and turns south once again, although it holds well above the critical 200-daily moving average (DMA) support at $1798.
The 14-day Relative Strength Index (RSI) trends in the bearish region but not oversold yet, suggesting that there is more room to the downside. Acceptance below the 200-DMA support could trigger a sharp drop towards the May 18 high of $1765.
Meanwhile, the bearish bias remains intact so long as the metal stays below the fierce support now resistance at $1850
Hourly chart
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Gold has confirmed a bear flag breakdown on the hourly sticks earlier in the Asian session. The price now attempts a bounce along with the hourly Relative Strength Index (RSI).
But the bulls are likely to face stiff resistance at the confluence of the pattern support and bearish 21-hourly moving average (HMA) at $1808. Further up, the pattern resistance at $1814 could be challenged.
To the downside, sellers will aim for the measured target at $1777 on a breach of the crucial support around $1800-$1798 levels.
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