Spot gold is drifting lower on the daily chart after failing to follow-through to the upside, following the two day rally that ended the week on a high note. The trend is down according to the minor and main swing charts. The 50-day and 200-day moving averages are giving a mixed signal.
The 200-day moving average at $4406.59 is long-term support. It stopped the selling and attracted new buyers last Thursday when the market fell to $4366.23.
The 50-day moving average at $4628.63 has been providing resistance and downward guidance since March 18.
Inside this moving average range, traders have primarily been straddling a long-term 61.8% level at $4541.88 and the bull/bear line at $4481.78.
The chart pattern suggests that traders have been actively bidding for good prices or value, but have shied away from taking out offers or buying strength. Last week’s technical bounce from $4366.23 and subsequent rally to $4595.33 in just one-day clearly demonstrates what I’m talking about.
There are a number of ways to play this market at this time. One is to look for an upside breakout over the 50-day moving average. Another is to look for a breakdown under $4366.23. Corresponding with each particular move will be the reaction to the bull/bear line at $4481.78.
The bull/bear line represents 20% off the record high at $5602.23. Holding over it will indicate that buyers are defending it. The longer the market can stay above it, the greater the chances of a successful breakout over the 50-day MA.
Crossing to the weak side of the bull/bear line will indicate that sellers are taking control. If they continue to build a short position then they will play for a breakdown under the 200-day MA at $4406.59 and this could turn ugly since the next major support doesn’t come in until $4099.12.
What to Watch
The oil-inflation-rates chain is running directly against Spot Gold (XAUUSD) right now and nothing in this week’s calendar is likely to break it unless the data misses. Fed speakers, the ISM prices-paid component, and Friday’s Non-Farm Payrolls report all have the ability to push rate expectations further in the hawkish direction. If the 40% probability of a December hike moves higher, Spot Gold (XAUUSD) is going back to test the 200-day moving average at $4406.59 and the $4366.23 low from last week.
The bull/bear line at $4481.78 is where the week gets decided. Holding above it keeps buyers in the game and a breakout over the 50-day moving average at $4628.63 is still possible. Losing it puts sellers in control and the next real support below the 200-day is $4099.12. That is a long way down with nothing in between.
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