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Gold bulls are fighting for control after a quick drop which tested the key support near $1933 levels from record high, now established at $1981.34. XAU/USD trades around $1940 as of writing, and needs to close above the critical 21-hourly Simple Moving Average (HMA) at $1946 to sustain bullish momentum, FXStreet’s Dhwani Mehta briefs.

Key quotes

“The sharp move lower can be mainly attributed to broad-based US dollar comeback, as investors resorted to profit-taking ahead of the FOMC monetary policy decision due to be announced on Wednesday. The US dollar recovery could be short-lived, as markets price in a dovish Fed announcement, in the face of stalling economic recovery stalls due to the coronavirus resurgence.”

“The hourly RSI has turned south after the drop and looks to breach midline, suggesting the corrective pullback could extend. Therefore, the next downside target is seen at the $1933.40 (daily low), below which the bullish 50-HMA at $1923.85 could be tested. Should the selling pressure accelerate further, a test of the $1900 mark will be imminent. That level is the convergence of the 100-HMA and round figure.”

“On the flip side, the $1950 psychological level will continue to offer stiff resistance, above which the fresh record high will be put at risk, as the bulls will then look to conquer the $2000 mark. Overall, for the bullish momentum to sustain in the near-term, the price needs to give a daily closing above the 21-HMA.”