Gold – Has it Turned Bearish or Taken a Breather?

Despite the month being only a little over a week old, it’s been a torrid March for Gold so far with the yellow metal erasing its entire February gains and looking vulnerable to further downside if it can’t halt the sell-off very soon.

Gold is currently down more than 3% for the month, a move that followed it reaching its highest level since 11 November, at the end of February before running into resistance from the 200 and 233-day simple moving averages.

Gold Daily

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Interestingly, as you can see from the Commitment of Traders Report below, non-commercial positions at the end of February were the longest they’ve been since November and we saw a particularly large jump in the final week of the month, which could have been seen by some as a bullish signal.

COT

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Instead, what we saw is momentum actually falling out of the move as we hit the last high – $1,263.99 – with the MACD histogram and stochastic creating a divergence with price, followed by a break of a speculative trend line (only two points touching) before gathering momentum lower.

The next test for Gold was around $1,220, with this level having been a key resistance and then support area on the way up. Despite holding at the first time of asking, we broke below here a couple of days later and yesterday closed below which could open up another move lower.

USDJPY – Has it Got a New Lease of Life?

The next test for Gold is $1,205, where the 55 and 89-DMAs cross – which has held at the first time of asking – followed by $1,200, which may offer psychological support.

The next major test though comes around $1,180 which markets the low from 27 January and falls around the 61.8% retracement of the move from the December lows to the end of February highs. A break below both of these could be a very bearish signal for Gold.

MS

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.