Gold is about to develop a bearish trend. The bulls failed to gain a foothold above the important mark of $1,800 and lost their way that could lead them to new targets and prolong the uptrend. The price per ounce has been steadily declining for the third consecutive session under strong pressure from bears.
Usually, a decline in gold goes hand in hand with the rising demand for other commodities. Therefore, the markets are now facing severe bearish pressure. In addition, a pullback from the level of $1,800 suggests that sellers are targeting the $1,500-1,600 levels. This is the point where the price may end up next year, either at the beginning or in the middle of it.
The bearish dominance is also confirmed by the fact that the quote went below the signal line of the medium-term trend at $1,790. This breakout cleared the way for sellers to a bearish level of 100-SMA at $1,777. If the price breaks through this level, the mark of $1,750 will become the next psychological level for the market.
An upward rebound is also likely, given that gold recovered slightly during the New York session. A jump above the 50-SMA could drive buyers to storm the resistance around $1,795. The next barrier is found at $1,800 and is followed by $1,810 which is a high from August 24.
As we can see, all technical factors are supporting gold bears. The fundamental background also gives no chance for the bulls. The current situation resembles the period at the end of 2012 and the beginning of 2013 when global regulators sent the economies into free float after the crisis. The only difference is that current events are developing more rapidly compared to the previous global financial crisis.
From its peak levels in 2011, gold lost almost half of its value by the end of 2014. Based on the past experience, we can say that this time gold may potentially decline to $1,560, thus offsetting all gains from April to August last year.
This crisis is marked with a faster economic and monetary response. Therefore, the correction of prices following an upward reversal can take only two to three quarters. As we can see above, last time it took three years for gold to do the same.
Jerome Powell's upcoming speech at the economic symposium also makes gold traders nervous and may significantly affect the balance of power, at least in the short term.
What will Jerome Powell say? This is the number one question in the markets. Analysts have different opinions but almost none of them bets on further softening of the monetary policy. Some experts believe that the Fed Chair will take a neutral stance and will continue to beat the air. Others, such as Goldman Sachs, are confident that Powell will nevertheless announce the beginning of a reduction of the bloated balance.
On the one hand, investors expect a rollback of the stimulus measures. On the other hand, they are afraid of the market panic that happened in 2013 when US Treasury yields soared due to the Fed's decision to suspend its QE program.
It is difficult to say which side Powell will choose. So, investors are cautiously waiting and trying to guess in which direction gold will move. Ahead the Fed's verdict, traders are stuck between support and resistance levels.
