Gold has taken on a bearish bias again in the short-term after failure to sustain an upside move above the key psychological level at 1300. Prices attempted a recovery off the 1260 area but this move proved to be a correction of the September to October downtrend that is in progress since the more than one-year peak at 1357.47.
Near-term risk is clearly tilted to the downside with trend and momentum signals supporting this view. On the 4-hour chart, there was a bearish crossover of the 20 and 50-period moving averages, while the RSI indicator has fallen below 50.
Softness in the market is expected in the near term with high odds for a dip towards the 1270 level before the 1260.59 low. A deeper extension lower cannot be ruled out as long as the market remains below the 50% Fibonacci retracement level (1308.78) of the downleg from 1357.47 to 1260.59.
Only a rise back above 1300 would suggest that downside pressure has weakened. Clearing resistance at 1320 (61.8% Fibonacci) would indicate the bearish phase has ended.
