Gold remains under pressure and risk is still to the downside as prices continue to drift lower from the 1300 psychological level. The short-term technicals are bearish and point to more weakness in the market.
Looking at the 4-hour chart, gold prices are looking capped by the 20 and 50-period moving averages which are negatively aligned after a bearish crossover that took place on October 19.
The next target is the October 6 low at 1260.59. At this stage the market would likely see a resumption of the downtrend from the 1357.47 peak and put in place a lower high at 1306.05.
Upside moves are likely to find resistance at 1283.04. This is the 23.36% Fibonacci retracement level of the downleg from 1357.47 to 1260.59. There is an important resistance zone between 1296.77 and 1308.04 (38.2 and 50% Fibonacci levels). Rising above this area would help shift the focus to the upside towards 1335.25. Breaking this level could see a re-test of the 1357.47 high and turn the bias to bullish.
In the short-term, the bearish phase remains in play especially if gold prices continue to trade below the 50% Fibonacci and under the key 1300 level. In the bigger picture, the market is neutral to bearish as long as the 1260.59 level holds.
