Gold is hovering inside the 1,921-1,943 area, a tad above its 3-month low and around 7.5% lower than the May 5, 2023 high of 2,079. The bulls are anxiously trying to put a temporary stop to the current short-term bearish trend and the bearish series of lower highs and lower lows.
The momentum indicators are still mostly on the bears’ side. The Average Directional Movement Index (ADX) is pointing to a bearish trend, the strongest one since the February-March 2023 correction, and the stochastic oscillator has just moved to its oversold (OS) territory. Although it can stay inside its OS area for a while, allowing gold to record lower lows, this drop is also an early sell-off exhaustion sign.
Should the bears decide to push the gold price even lower, they would quickly try to break the 1,921-1,943 area defined by the September 6, 2011 high and the 100-day simple moving average (SMA). Lower, the 61.8% Fibonacci retracement of March 8, 2022 – September 28, 2022 downtrend at 1,896 is unlikely to trouble the bulls as they would then set their eyes on the key 1,843-1,853 area.
On the other hand, the bulls would love to keep gold above 1,943 and gradually target the busier 1,959-1,976 area that is populated by January 6, 2021 high and the 50-day SMA. If successful, they would then have the chance to record a higher high, breaking the recent bearish pattern of lower highs, and open the door to a move above the 2,000 threshold.
To sum up, the bulls are trying to put a temporary stop to gold’s freefall by defending the 1,921-1,943 level, but there is still some gas left in the bearish tank.
