Gold’s Collapse Subsides but Downside Risks Remain

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Gold has found some footing in the vicinity of the lower Bollinger band and recent trading session troughs, following a freefall in the commodity – due to a more aggressive message from the Federal Reserve regarding rate hikes in 2022 – from 1,854, which extended below the simple moving averages (SMAs) and the 1,800 handle. The dipping 50-day SMA is reflecting that the trend in the commodity has become increasingly negative.

The short-term oscillators are skewed to the downside but have yet to fully validate that bearish momentum could continue to run hot. The MACD is falling below its red trigger line but has yet to pierce beneath the zero threshold, while in oversold territory, the stochastic %K line, is hinting that negative pressures have become somewhat frail for now. Nonetheless, the RSI is diving in bearish regions, promoting growing downside momentum in the commodity.

In the negative scenario, support could originate from the 1,780-1,785 area, where the lower Bollinger band also resides. If selling interest intensifies again, the price may then tackle the 1,750-1,763 support barricade, which began to take shape around October 2021. A breach of this medium-term base could then cheer sellers to aim for the 1,715-1,724 border that has opposed negative pressures since April 2021.

On the other hand, if buyers manage to find some traction off the lower Bollinger band, an initial zone of resistance could start to emerge from the 100-day SMA at 1,795 until the 200-day SMA at 1,806. Overstepping this crowded section of obstacles, the upside momentum may then stall around the mid-Bollinger band at 1,816. However, if the bulls remain energized, they could drive the price past the inside swing low of 1,828 and challenge the 1,848-1,854 resistance barrier.

Summarizing, gold is sustaining a neutral bias despite recent significant selling. That said, buyers could regain an upper hand if the price pilots above the mid-Bollinger band, while sellers would take the lead should the price slide below 1,780-1,785. Furthermore, the precious metal has been oscillating for more than half a year between 1,715 and 1,877.