Gold is having a rough day; can it be stopped?
Joe Perry February 26, 2021 5:44 PM
The US Dollar and Gold move inversely to one another.
With the US Dollar screaming higher today, it’s no surprise that Gold is moving aggressively lower. In theory, the US Dollar and precious metals move inversely to one another. The reason is that gold is traded in US Dollars. So a rise in the US Dollar, means that it takes fewer dollars to buy an ounce of Gold. Also, there may be another store of value where investors may wish to put their money. With a spike in yields, traders may be moving funds out of gold and into a higher yielding investment, such as bonds.
Gold (XAU/USD) has been in a decline since putting in recent highs on August 7th, 2020. Since then, the precious metal has been falling in an orderly channel. Price posted a false breakdown below the channel in early December 2020, only to move back into the area. Today, Gold prices broke through a confluence of support, including the December lows and the 50% retracement level from March 20th, 2020 low to the August 7th, 2020 high, near 1765.30. Price also moved below the bottom trendline of the downward sloping channel near 1730. Support doesn’t come into play again until the 61.8% Fibonacci retracement area from the previously mentioned timeframe near 1692.21! However, given that Gold is already down over 2.5% on the day, and the RSI is in oversold conditions, it may be ready for a bounce.
Source: Tradingview, FOREX.com
Where can price bounce to? On a 60-minute timeframe, with no longer-term timeframe resistance until 1760, the Fibonacci retracements on the day give a look at where sellers may be waiting to add to shorts. The 38.2% retracement is at 1736.50, the 50% retracement is at 1742.41, and the 61.8% retracement is at 1748.33. Notice the RSI is turning up, in extreme oversold territory, so a bounce may soon be ahead.
Source: Tradingview, FOREX.com
Learn more about gold and silver trading opportunities.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.