Gold Technicals – Sell Off Continuing With Suspected Funds Selling Again

Gold prices traded lower yesterday following improving economic conditions from Europe, driving the safe haven metal traded lower due to improved risk appetite. However, price did not recover even though risk appetite evaporated during US session, largely due to the fact that the decline was brought about by higher tapering fears, which drove Gold prices further lower instead. This morning saw further selling in Gold prices without any provocation. Furthermore, Asian markets were trading lower, with Nikkei 225 closing at -4.00% and HSI at -1.53%, but that didn’t have any bullish impact on prices when one would expect Gold’s safe haven nature would result in some sort of rally. This only reason why prices managed to dip lower without any apparent reason can only be attributed to the fact that there were huge sell orders during the time. Where did the sell orders come from? We do not have any evidence, but a smart guess will pin it on funds selling, most likely funds that have bought Gold during the low 1,200s similar to yesterday.

Daily Chart

If this assertion is true, we could see potential quick acceleration back towards 1,200 and perhaps beyond. Technicals agree that such an assertion isn’t too far-fetched, with prices currently rebounding off the Channel Top, being kept afloat by Ichimoku’s Senkou Span A, which happens to be the confluence with the ceiling back in early July. A break of this level will open up Channel Bottom which is currently standing below 1,200. The only issue is that both Stochastic readings and Ichimoku Forward Kumo suggest that an immediate move towards 1,200 and below may not be likely, with Stoch readings already within Oversold region and Forward Kumo showing a Bullish Twist. Hence, even if prices break Senkou Span A, a temporary pullback towards the same Senkou Span A cannot be ruled out. A stronger case for a bearish move towards 1,200 can then be formed when the subsequent bearish rejection from Senkou Span A occurs.

Hourly Chart

Short-term Chart also show prices trading within a descending Channel, with current price rebounding off Channel Top towards Channel Bottom. Unlike the levels in Daily Chart, Stoch readings are pointing higher, and still have space to go before hitting Overbought region. As such, it may be premature to simply assume that price will simply trade lower from here out. Stoch readings should form a peak together with price clearing the previous swing low of 1,273+ in order to open Channel Bottom as a bearish target with more conviction.

More Links:
GBP/USD – Turned Away Again from Resistance at 1.54
AUD/USD – Rallies to Back Above Key 0.90 Level
EUR/USD – Moves through Resistance at 1.33

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