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Gold Price Analysis: Bears in control below critical resistance

  • Gold is extending to the downside from critical resistance.
  • Support is key at this juncture which the battle between technical and fundamentals play out. 

In a follow-up to the prior analysis, Gold Price Analysis: Bulls slammed at critical resistance, focus is on weekly target again, the price is indeed melting, albeit slowly.

Fundamentally, analysts at TD Securities explained that Gold-as-a-safe-haven' isn't incredibly appealing for investors during an incredible economic recovery.

''Investment flows into gold remain subdued as a result of the high-stakes game being played between the Fed and the market, which catalyzed a change in regime for the yellow metal from inflation-hedge product to safe-haven asset.''

However, the analysts have warned that drivers that hit gold hard such as a steeper real yield curve, higher yields, technical selling and strengthening USD are unlikely to be sustained for much longer.

For the downside to continue, meanwhile, the macro headwinds can continue to play out, especially as momentum picks up from technical movements.

Overall, the upside is expected to play out in time.

Analysts at TD Securities have argued that with Janet Yellen at the helm of the Treasury, ''spending should rise and we don’t expect large tax increases in the recovery phase either, which implies sky-high debt that the central bank will need to absorb.''

''The associated fears of USD debasement, in addition to negative real rates policy, should eventually see gold rally from the lows.''

Gold technical analysis

We have a significant layer of support at this juncture as illustrated on the 4-hour chart, but while the price is below resistance the bias is to the downside 

Daily chart

Should the support hold, there are prospects of a daily W-formation in the makings in an upside extension. Such a pattern would offer future trading opportunities in fading the bullish impulse. 

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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