- Gold continues to suffer under a stronger US dollar.
- XAU/USD has lost the 50 SMA crucial support, risking declines towards $1,780.
- Recovery will come into play if gold settles above the 23.6% Fibonacci level.
Gold has recently been rejected at $1,850, paving the way for the ongoing declines. Before that, the precious metal had rebounded from support established at $1,780. However, after losing critical support, declines are most likely to carry on in the week starting Monday.
A short-term compressive analysis shows t5he Moving Average Convergence Divergence (MACD) on the 4-hour chart reinforcing the breakdown. The indicator follows the direction of the asset’s trend while measuring its momentum.
The MACD can also identify local selling positions to sell the top and buy the bottom. If the MACD line (blue) crosses below the signal line, the asset is likely to correct from the uptrend. On the other hand, a buy the bottom signal occurs when the MACD line crosses above the signal line.
For now, XAU/USD is still a sell zone, as observed with the MACD indicator. Moreover, the price closed the week under the 50 Simple Moving Average, which adds credibility to the downtrend.
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XAU/USD 4-hour chart
Looking at the other side of the fence
On the other hand, gold will embark on recovery if it steps above the 23.6% Fibonacci level taken between the last swing high of $1,960 to a swing low at $1,785. Another significant move will be to step above the 50 SMA on the same 4-hour chart. It is vital to anticipate more resistance at the 100 SMA and the 200 SMA.
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