Gold remains on track to test the August low of $1863

Gold (XAU/USD) plummeted 3% and reached the lowest levels in six-week at $1882 on Monday. The yellow metal treads water above $1900 in Tuesday’s trading so far, as the dollar bulls take a breather, digesting the release of the Fed Chair Jerome Powell’s prepared remarks ahead of his three-day Congressional testimony, FXStreet’s Dhwani Mehta briefs.

Key quotes

“Powell said that the Fed is committed to using all policy tools available to support the post-pandemic economic recovery. The sentiment on the global stocks will remain in focus for fresh impetus on gold. Should the risk-aversion deepen in the sessions ahead, the safe-haven dollar could see a fresh leg higher, weighing once again on the USD-denominated gold.”

“Although a brief bounce cannot be ruled out before the yellow metal resumes the sell-off. The 14-day Relative Strength Index (RSI), currently at 43.85, has turned flat, backing the case for a temporary pullback, especially given Monday’s slump. Therefore, the immediate upside barrier is aligned at the pattern support now resistance at $1930. A break above which the confluence of the 21 and 50-DMAs around $1940/41 will limit the recovery attempts.”

“To the downside, the $1900 level could be once again challenged by the bears. The next downside target at $1882 (Monday’s low) could be put at risk. A failure to defend the latter could expose the August low at $1863.”