Gold not only lost the $2,000 level during the week, but it also broke through the key support area at $1,970. After declining by over $60 in three days, it stabilized and found support above $1,950. The move lower was driven by a rally in the US Dollar and higher government bond yields. As a result, the yellow metal reached its lowest level in six weeks, extending the correction from its record high level struck in May.

The sharp decline in Gold has sent the price below key technical support areas. The current configuration suggests that the decline may not be over, and the correction from record high levels has more room to go.

On the weekly chart, the Relative Strength Index (RSI) has turned south, moving away from 70, and Momentum is also heading south. The immediate support for Gold is at the $1,950 area. A break below this level could trigger more losses, exposing a strong support range delimited by an uptrend line and the 20-week Simple Moving Average (SMA) between $1,920 and $1,930. A weekly close below that area would indicate more weakness ahead. However, if Gold holds above that level, it could set the stage for a rebound.

Recovery above $1,975 would alleviate the bearish pressure in the short term. A daily close above $2,005 is needed to strengthen the outlook for the yellow metal, while a weekly close surpassing $2,020 will lay the ground for new record highs.

The possibilities on the chart are slightly bearish bias in the short term with the one-week target aligning just below $1,950. The majority of polled experts see a rebound later in Gold, and retaking $2,000 by July.

Fall on gold can be considered as last leg of bearish correction

May 21 2023