Gold – Has it Turned Bearish or Taken a Breather?

Despite the month being only a little over a week old, it’s been a torrid March for Gold so far with the yellow metal erasing its entire February gains and looking vulnerable to further downside if it can’t halt the sell-off very soon.

Gold is currently down more than 3% for the month, a move that followed it reaching its highest level since 11 November, at the end of February before running into resistance from the 200 and 233-day simple moving averages.

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Interestingly, as you can see from the Commitment of Traders Report below, non-commercial positions at the end of February were the longest they’ve been since November and we saw a particularly large jump in the final week of the month, which could have been seen by some as a bullish signal.

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Instead, what we saw is momentum actually falling out of the move as we hit the last high – $1,263.99 – with the MACD histogram and stochastic creating a divergence with price, followed by a break of a speculative trend line (only two points touching) before gathering momentum lower.

The next test for Gold was around $1,220, with this level having been a key resistance and then support area on the way up. Despite holding at the first time of asking, we broke below here a couple of days later and yesterday closed below which could open up another move lower.

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The next test for Gold is $1,205, where the 55 and 89-DMAs cross – which has held at the first time of asking – followed by $1,200, which may offer psychological support.

The next major test though comes around $1,180 which markets the low from 27 January and falls around the 61.8% retracement of the move from the December lows to the end of February highs. A break below both of these could be a very bearish signal for Gold.

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