Gold looks tired in an environment where it should be thriving

• Gold has struggled to break $2000 after the significant bounce seen in October
• The unconvincing price action comes despite sharply lower real bond yields, a softer USD, persistent geopolitical tensions and buying from central banks
• Gold may have to move lower to go higher

US real bond yields are down sharply, the US dollar is softer, visible central bank buying is on track for the largest year on record while the geopolitical situation in the Middle East remains as perilous as ever. That’s four fundamental positives for gold yet it can’t even muster even a modest bid.

That’s telling, signaling that in the absence of a significant escalation in Middle East tensions – which drove the massive bounce seen In October – gold may have to move lower before it can think about retesting the highs hit earlier this year.

Gold struggles when it should be shining

Looking at the daily chart, you can see the difficulty gold has had overcoming resistance located just above $2000, failing on multiple occasions to break through this psychologically important level. Like a game of whack-a-mole, every probe has seen sellers move in, including Friday where there was a large reversal as demonstrated in the length of the wick on the daily candle.

Even though pullbacks have been modest to this point, with buyers swooping on dips below former resistance around $1980, you get the sense risks may be skewing to the downside near-term. RSI suggests upside momentum has shifted after hitting overbought levels. MACD looks like it’s about to crossover from above, too. It just looks tired, to use a non-technical term.

In the absence of a black swan event, selling pops towards $2000 may find greater participation given the unconvincing price action in an environment where gold should be shining. For those considering joining in, a stop-loss above $2010 would offer protection. On the downside, support located around $1946 would be the initial downside target.

-- Written by David Scutt

Follow David on Twitter @scutty