Gold Fell to Support But Unlikely to Turn Higher Soon

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The price of gold fell to a new nine-month low on Tuesday, at one point falling below $ 1725. In the region of $ 1720-1740, gold found support in the declines of the last 15 months, and the daily charts clearly show that gold sellers have slowed down recently.

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Interestingly, gold has been living its life in recent days, experiencing a sharp drop earlier in the month, but gaining support last week. Judging by the market dynamics, the single most aggressive decline of the single currency in the previous week supported gold buying.

Since March, the euro-gold price has already found support several times at the approach of the € 1700 area, a major milestone, and the area of ​​the high in August 2020, while maintaining significant downside potential.

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It would be naive to assume that buying gold would now protect capital in the event of existential problems in the Eurozone. But this assumption is hard to confirm with history.

In 2012, gold was losing with the euro, and it only reversed upwards in the second half of the year after the recovery of the eurozone confidence.

Gold reached 61.8% of the 2018-2020 growth wave with accumulated local overselling. In such an environment, a near-term rebound is highly likely, which would be true if the dollar also loosened its hold.

However, a rebound in the coming days could prove to be a bull trap or not at all. To the most pessimistic scenario, seasonality and low potential in higher time frames are favorable.

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Gold rarely changes its chosen trend in March-April, but it often does so in August-September. On the weekly candlesticks, the gold is far from the oversold area, and it is easy to see that we have seen reversals on these intervals when the oversold area is affected.

A possible target for the bears could be the 200-week moving average, pointing up and now going through $ 1650.

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