Gold Price Analysis: XAU/USD down by $6 in Asia, weekly chart shows bullish trend exhaustion

Gold declines despite US-China trade tension and weakness in risk currencies.
Technical charts indicate scope for deeper declines in the short-term.

Omkar Godbole FXStreet Contributor

Gold, a safe-haven asset, is flashing red at press time even though the growth-linked currencies like the Aussie dollar are struggling to gain altitude.

The yellow metal is currently changing hands $1,728 per ounce, representing a 0.40% decline on the day, having hit a high of $1,735 in early Asia.

The pullback looks confounding if we take into account the lingering US-China concerns and heightened prospects of a prolonged economic downturn in the US, the world's largest economy.

However, the decline doesn't look surprising from the technical analysis perspective. The weekly chart shows the metal formed a spinning top candle (small body and large wicks) in the five days to May 22. The candlestick pattern has appeared following a notable rally from $1,451 to $1,765 and indicates buyer exhaustion.

Meanwhile, the daily chart is reporting a bearish candlestick arrangement - prices fell by 1.24% on Thursday and closed below $1,727, confirming the bearish reversal signaled by the inverted hammer created on May 18. On the hourly chart, the metal is trapped in a falling channel.

As a result, gold could suffer a deeper decline to $1,720 (5-week simple moving average), under which, major support is seen at $1,700.

A falling channel breakout on the hourly chart, if confirmed, would imply an end of the price pullback from the 7.5-year high of $1,765 and shift risk in favor of a re-test of that level.

Weekly chart

Hourly chart

Trend: Bearish

Technical levels

1. R3 1757.58
2. R2 1749.01
3. R1 1741.61
PP 1733.04
1. S1 1725.64
2. S2 1717.07
3. S3 1709.67

Author

Omkar Godbole

FXStreet Contributor

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

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