The price of Gold dropped after reaching the 1,670 level. Now, it is traded lower at 1,643 at the time of writing. After its strong rally, a temporary retreat was natural. The price could test and retest the near-term downside obstacles before trying to develop a new bullish momentum.
Fundamentally, the yellow metal dropped even if the US data came in worse than expected. The DXY continues to stay higher but we cannot exclude a deeper drop. The US Flash Services PMI dropped from 49.3 to 46.6 points, even though the consensus suggested a potential growth to 49.6 points. Besides, the Flash Manufacturing PMI dropped unexpectedly to 49.9 from 52.0 below the 51.0 expected, signaling contraction in this sector as well. Today, the CB Consumer Confidence could really shake the markets. The indicator is expected to drop from 108.0 points to 105.9 points. This is seen as a high-impact event and it could bring sharp movements.
XAU/USD Retests The Sellers!
As you can see on the h1 chart, XAU/USD reached the 1,640 - 1,645 support zone. The price action developed a minor down-channel pattern which could represent a bullish pattern.
After its strong rally, the current rate is natural. The descending pitchfork's median line (ml) represents dynamic support. As long as it stays above it, it could still develop a new leg higher.
Gold Forecast!
An upside breakout from the current flag, jumping, closing, and stabilizing above the downtrend line and through the weekly pivot point (1,647) may signal that the downside movement ended and that the rate could develop a new bullish movement. This scenario could bring new long opportunities.
Only a valid breakdown below the median line (ml) and through the S1 (1,627) could announce a larger drop and could invalidate the upside scenario.
