Gold marked a fresh six-week high of 1,831 in the first trading hours of 2022 before turning negative on the day.
The pullback commenced near the 23.6% Fibonacci retracement of the latest upleg (1,680 – 1,877), but looking at the momentum indicators, the current weakness in the price is not a big concern yet. The RSI continues to trend upwards well above its 50 neutral mark, the MACD is gaining strength above its signal and zero lines, and the Stochastics are pointing northwards again after a short consolidation phase, all reflecting a bullish bias.
If the precious metal resumes its positive momentum above the 1,830 border, all attention will turn to the tentative descending trendline drawn from the record high of 2,079, at 1,850. A decisive close above that line could see an acceleration towards the 1,877 peak. Yet, for the bulls to reach the 2021 top of 1,959, and hence upgrade the medium-term picture back to positive, they will first need to clear the 1,900 – 1,916 ceiling.
In the bearish scenario where the price dives below the 1,800 floor and closes below its simple moving averages (SMAs), the decline could stretch towards the 50% Fibonacci of 1,778 and the 1,770 support area. An ascending trendline (drawn from the March 2020 lows) is passing through this zone. Therefore, another correction lower from here could see a continuation towards the 1,743 – 1,722 territory. Should the sell-off gain extra legs, the five-month low of 1,680 could come next under the spotlight.
In brief, despite today’s fragility, gold could preserve buying interest. A significant break above the 1,830 – 1,850 bar could bring new buyers into the market.
