Commodities

Technical Analysis – Gold leans to the bearish side again; 200-day SMA in focus

Posted on January 11, 2021 at 8:58 am GMT

Christina Parthenidou, XM Investment Research Desk

Gold came under severe selling pressure on Friday, slumping below a steep ascending trendline and back into the descending channel.

The sharp-sell off saw another extension towards a six-week low of 1,817 early on Monday, but the precious metal managed to recoup its intraday losses and climb back above its 200-day simple moving average (SMA) and to the 1,850 level.

From a technical perspective, the bears could dominate in the short run as the recent decline in the price drove the RSI below its 50 neutral mark and the MACD beneath its red signal line. The downward move in the Stochastics and the weakness in the red Tenkan-sen line, which is set to cross below the blue Kijun-sen, is another discouraging signal.

That said, the price needs to close clearly below the 200-day SMA and more importantly below the resistance-turned-support of 1,817 to motivate additional selling towards the 1,790 – 1,764 area. Breaching that floor, the next obstacle could commence within the 1,745 – 1,715 region, along the bottom of the channel.

Alternatively, if the price secures strong footing around the 200-day SMA, where the 23.6% Fibonacci of the 2,079 – 1,774 down leg is also placed, it could attempt to pierce the 38.2% Fibonacci of 1,883 and the topline of the channel, breaching its 20- and 50-day SMAs on the way up. If efforts prove successful, positive momentum may run up to the 50% Fibonacci of 1,920, while higher all attention will turn to the key 1,956 bar.

Looking at the market structure in the bigger picture, last week’s bullish wave was not strong enough to violate November’s peak of 1,965 despite the break above the channel, holding the downward pattern intact. The narrowing distance between the 50- and 200-day SMAs continues to signal a trend deterioration.

In brief, gold remains exposed to downside corrections in the short term following Friday’s collapse, though for the bears to get fresh impetus they should first claim the 200-day SMA and the 1,817 number.

gold

Legal disclaimer: The material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instruments. XM accepts no responsibility for any use that may be made of these comments and for any consequences resulting in it. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. The research and analysis does not involve any specific investment objectives, financial situation and needs of any specific person who may receive it.

It has not been prepared in accordance with legal requirements designed to promote the independence of research, and as such it is considered to be marketing communication. Although we are not specifically constrained from dealing ahead of the publication of our research, we do not seek to take advantage of it before we provide it to our clients. We aim to establish, maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. We operate a policy of independence, which requires our employees to act in our clients’ best interests and to disregard any conflicts of interest in providing our services.

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losing all of your invested capital, so please make sure that you fully understand the risks involved.