Gold entered the week on a shaky note as investors turned their attention towards the Federal Reserve meeting on Wednesday and key U.S economic data expected over the next few days.
Price action is likely to remain choppy in the short-term as market players juggle with conflicting forces influencing the precious metal.
Gold has pretty much transformed into a fierce battleground for bulls and bears.
On one side of the equation, bulls continue to draw strength from a weaker dollar, falling Treasury yields, and Covid-19 fears. However, bears are also being been inspired by optimism around a global economic recovery, strong corporate earnings, and continued rollout of Covid-19 vaccinations in developed economies. This tough tug of war could result in heightened levels of volatility as the precous metal attempts to make its next major move.
A deep dive into the technicals…
The daily chart remains bullish as there have been consistently higher highs and higher lows. Prices are trading above the 50-day Simple Moving Average while the MACD is above zero. Should $1770 prove to be reliable support, this may become the new higher low. Such a scenario may open the doors towards $1800.
One thing to keep in mind is the 100-day Simple Moving Average just above the $1800 psychological resistance level.
If bulls are unable to secure a solid daily close above $1800, this could trigger a decline back towards $1770 and $1762, respectively.
Weekly trend turning bullish?
Gold still remains in a bearish channel on the weekly timeframe. Prices are trading below the 20 and 50-week Simple Moving Average.
Although there have been consistently lower lows and lower highs, the downtrend could come to an end if a weekly close above $1800 is achieved. Such a move may place bulls in a position of power to challenge the $1870 resistance. Should $1800 prove to be reliable resistance, a decline back towards $1700 could be on the cards.
How about the monthly timeframe?
Over the past few months, prices have traded within a very wide range on the monthly timeframe. Resistance can be found around $1960 and support at $1700. A monthly close above $1800 could inspire bulls to tackle $1870 and $1960, respectively. However, a decline towards $1700 may be the first signal for a move towards $1570 in the longer term.
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