Gold Price Forecast: Below $1,300 as expected, what's next?
|Gold is currently trading at $1,292 per Oz – down 2.66 percent on the week, its biggest weekly loss since May 2017.
The yellow metal is also down 1.53 percent on the day – the biggest single-day drop since August 2015. Further, it is closing in the red for the third straight day - the longest losing streak since Nov. 27.
More importantly, at press time, it is down 4 percent from the recent high of $1,346.
The drop to $1,300 was expected, as discussed on Feb. 28. After all, XAU had established a bearish lower low pattern with a close below $1,321 (Feb. 21 low) on Feb. 27.
While technical selling seems to have played a big role in pushing the metal lower, the break below $1,300 seems to have been fueled by an uptick in the US dollar - gold's biggest nemesis.
As of writing, the dollar index (DXY), which tracks the value of the greenback against majors, is trading 0.30 percent higher on the day but is flat lined on weekly basis.
On the weekly chart, however, it has created a long-tailed doji – a sign of dip demand.
What's more, EUR/USD has created a candle with long upper shadow for the second day, marking fourth straight rejection at 1.1407 (61.8% Fib R of 1.1514/1.1234). Therefore, the pair could remain under pressure next week and the resulting broad-based USD strength would only add to the bearish tone around the zero-yielding safe-haven metal.
Technical charts are also pointing to deeper losses, albeit after a minor bounce. That said, the yellow metal could pick up a strong bid, irrespective of dollar strength if Indo-Pak tensions escalate to full-blown war.
Daily chart
On the daily chart, gold has dived out of the ascending trendline and the breakdown is backed by a bearish crossover of the 5- and 10-day moving averages (MAs).
The 14-day relative strength index (RSI) has also dropped below the support at 54.88 and is now reporting bearish conditions with a below-50 reading. Meanwhile, the moving average convergence divergence (MACD) histogram is losing altitude below the zero line, signaling the bearish momentum is gathering steam.
As a result, a deeper drop toward the next major support at $1,276 (Jan. 24 ) could be in the offing.
That said, RSIs on the hourly and 4-hour charts are reporting oversold conditions with a below-50 print. Hence, prices could see a minor bounce to $1,300 or higher.
The outlook, however, will remain bearish while prices are held below the descending (bearish) 10-day MA, currently located at $1,323 (and seen sloping lower to $1,318 next week).
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