Gold remains comfortably below the 2,000 psychological level, a significant drop from the May 4, 2023 high of 2,079. This is probably the bulls’ first serious defeat since the start of the strong upleg in October 2022. They are currently trying to recover some of their recent losses and appear to have heavily invested in holding the 1,959 level. This is key for market sentiment.
The momentum indicators are mostly still on the bears’ side. The Average Directional Movement Index (ADX) is clearly pointing to a muted bearish trend, and the stochastic is edging aggressively lower. However, it has just entered its oversold territory (OS) where it can stay for a while. This means that bearish pressure could continue to affect gold, but with the potential next downleg being less aggressive than currently envisaged by the bears.
Should the bears muster the courage and take advantage of these bearish signals, they would aim for a break of the January 6, 2021 high at 1,959. Lower, the 1,921-1,930 area defined by the September 6, 2011 high, the 100-day simple moving average (SMA) and the November 3, 2022 upward sloping trend line respectively could prove tougher to crack.
On the other hand, the bulls would love to hold the 1,959 level, quickly break the 50-day SMA at 1,990 and then try to recapture the 2,000 mark. The March 20, 2023 high at 2,010 would be the first test of their resolve. If successful, the April 13, 2023 high of 2,049 would then be the next target.
To sum up, the bulls are trying to put a temporary stop to gold’s freefall by defending the 1,959 level, but the bears feel confident that there is still some gas left in the tank.
