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  • A combination of factors assisted gold to gain some traction on Wednesday.
  • The uptick lacked follow-through and remained capped near 200-hour SMA.
  • The set- favours bearish traders and supports prospects for further weakness.

Gold struggled to capitalize on the Asian session bounce from weekly lows and was last seen trading with only modest gains, around the $1730 region.

The prevalent risk-off mood extended some support to the safe-haven XAU/USD. This, along with some follow-through slide in the US Treasury bond yields, further benefitted the non-yielding yellow metal. However, the underlying bullish sentiment around the US dollar capped any meaningful upside for the dollar-denominated commodity.

From a technical perspective, the intraday uptick faltered near the $1735 confluence breakpoint and supports prospects for the resumption of the prior downward trajectory. The mentioned region comprised of 200-hour SMA and short-term ascending trend-line extending from the $1677-76 region, or multi-month lows touched on March 8.

Meanwhile, technical indicators on the daily chart maintained their bearish bias and are yet to recover from the negative territory on hourly charts. This further adds credence to the near-term bearish outlook. Hence, a subsequent fall below the $1700 mark, towards retesting multi-month lows, looks a distinct possibility.

Some follow-through selling will be seen as a fresh trigger for bearish traders and set the stage for a slide towards the $1630-25 intermediate support. The XAU/USD could eventually drop to test sub-$16000 levels in the near-term.

On the flip side, the trend-line support breakpoint, now coinciding with the $1740-42 supply zone, should act as immediate resistance. A sustained move beyond might trigger a short-covering move and push the XAU/USD beyond the $1750 level. That said, the positive move might still be seen as a selling opportunity and remain capped near the $1765-60 area.

XAU/USD 1-hourly chart


Technical levels to watch