Gold experienced a pullback after peaking at the all-time high of 2,079 in early May, falling beneath its 2,000 psychological mark and the 50-day simple moving average (SMA). Although bullion has been stuck within a tight range for the past month, the formation of a structure of lower highs is hinting at a deteriorating technical picture.
The momentum indicators currently suggest that near-term risks are tilted to the downside. Specifically, the stochastic oscillator is set to post a bearish cross, while the RSI has flatlined beneath its 50-neutral mark.
Should the bearish near-term structure extend, the price could initially challenge the recent three-month low of 1,925. If that floor collapses, the spotlight could turn to 1,885 before the 2023 bottom of 1,804 gets tested. Even lower, the 1,774 hurdle may provide downside protection.
Alternatively, if the price manages to break above the restrictive trendline that connects the recent lower highs, initial resistance could be found at 1,985, which overlaps with the 50-day SMA. Conquering this barricade, the bulls could aim at the crucial 2,000 psychological mark before 2,048 comes under examination. Piercing through the latter, the price could revisit its record high of 2,079.
Overall, gold has been directionless in the past month, but the short-term oscillators are slowly tilting towards the bearish side. Therefore, a failure to break through the descending trendline might trigger a significant retreat.
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