It’s not been a good week for gold. Just as it seemed like buyers might be looking to take a peek at a firmer run above $4,000, they are now being dragged back to the danger zone. After all the pushing and pulling this week, gold is now finding itself staring down a rather uncomfortable test just below the figure level.
The drop since overnight trading sees the precious metal move to $3,960 now, as the dollar continues to flex its muscles. The stronger-than-expected US CPI report earlier this week has certainly complicated matters , with traders now having to contend with a more hawkish Fed outlook alongside higher Treasury yields. Yes, the bond market is back in action today and 10-year yields are still keeping at 5%.
Overall, that’s hardly the sort of combination gold buyers would be hoping for – especially with the technical picture also starting to look rather fragile.
Looking at the weekly chart, gold is now approaching a crucial support region around $3,900 to $3,930. That includes the 100-week moving average (red line), which is currently sitting at $3,897, alongside the recent swing lows from July and September. The confluence of these technical levels makes this region a rather important line in the sand for buyers.
A firm break below the support region could open the door for a deeper correction towards $3,500 next, with the broader bullish trend then facing a much sterner test. For some context, the last time that gold decisively broke below any of its key weekly moving averages was all the way back in October 2023. So, that speaks to just how much momentum buyers had been riding on over the past two years especially.
On the flip side, holding above the 100-week moving average would at least offer buyers some breathing room to regroup. But even so, I would argue that reclaiming $4,000 alone won’t be enough to turn the mood around. The recent lower highs suggest that sellers are still maintaining control for the most part, with the $4,200 level standing in the way of a more meaningful recovery. Beyond that, $4,600 remains the next major resistance hurdle for gold buyers.
For now, the big question is whether buyers can defend the key support region that has been keeping the broader bullish structure intact. And they certainly have their work cut out with the dollar and Fed rate expectations working against them as we approach the latter stages this week. It’s squeaky bum time.
This article was written by Justin Low at investinglive.com.
