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  • Gold maintained its heavily offered tone through the early North American session.
  • The set-up supports prospects for an eventual break below the $1900 support area.
  • Oversold conditions on hourly charts warrant some caution for bearish traders.

Gold extended last week’s rejection slide from a short-term descending trend-line resistance and tumbled to six-week lows during the early North American session. Bears now await some follow-through selling below a strong horizontal support near the $1905-$1900 region.

Meanwhile, the combination of a descending trend-line resistance and horizontal support constituted the formation of a descending triangle. Hence, a convincing break below the $1900 level will mark a fresh bearish breakdown and pave the way for further weakness.

Meanwhile, technical indicators on the daily chart have just started drifting into the negative territory and add credence to the bearish outlook. However, oscillators on hourly charts are already flashing oversold conditions and warrant some caution.

Hence, it will be prudent to wait for a sustained breakthrough the mentioned horizontal support before positioning for any further near-term depreciating move. The commodity might then accelerate the fall towards August monthly swing lows support near the $1963-62 region.

On the flip side, any attempted recovery might now be seen as an opportunity to initiate some fresh bearish positions. This, in turn, should keep a lid on any further gains for the commodity near a one-week-old trading range support breakpoint, around the $1937-38 region.

Gold 4-hourly chart

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Technical levels to watch