If you believe that the 200-day moving average at $4353.69 is the major support and trend indicator then current price levels should be attractive to you because it’s an easy exit if you are wrong.
If you believe the 50-day moving average at $4705.25 is the trend indicator and resistance then you are leaning toward the short side of the market, looking for a breakdown under the 200-day MA.
I think this current moving average setup explains why the market has been trading mostly sideways for nearly two months. However, we’re going to find out within a relatively short time who is right because the 50-day MA is rapidly falling toward the slow rising 200-day MA, which indicates a potentially bearish crossover is coming.
Another way to look at the market is by watching trader reaction to $4481.78. This price is 20% below the all-time high at $5602.23, which by classic technical analysis measures, separates the bull market from the bear market. So the real question is will the technical algorithms start buying heavily at $4481.78 to defend the bull market, or will they flip to dumping positions on the weak side of that level.
Monday’s low at $4480.41 and subsequent technical bounce shows that traders are still buying dips at key levels, but will it hold a second or third time if tested again.
What to Watch
The oil and rate story are the two drivers that are still live and still pointed in the same direction against gold. If Middle East tensions ease and Spot Brent crude oil pulls back meaningfully, inflation concerns start cooling. A softer inflation picture eventually pulls the 10-Year U.S. Treasury yield back below 4.5%, the U.S. Dollar Index weakens, and Spot Gold (XAUUSD) has room to recover toward $4,700 or higher. None of that is happening right now.
The 50-day moving average at $4705.25 is falling toward the 200-day moving average at $4353.69 and that potential bearish crossover is the technical story defining this market right now. $4481.78 is the line that matters most. It held Monday. Whether it holds a second or third test is the question traders are sitting with going into the rest of the week.
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