Gold retraces on overbought condition


Weekly chart

Gold has pulled back today, giving the weekly candle an inverted hammer appearance. The weekly candle is still to open, but the selling tail does coincide with an overbought condition on the RSI (black ellipse). This decline is likely profit-taking, as markets bounce from overstretched levels and adopt a risk-on sentiment today as buyers look for bargains. In addition, geopolitical risks may broadly reflect in current prices; however, uncertainty still prevails. In this regard, gold as a safe haven is still an asset of interest, and pullbacks may find that they are supported. If the weekly stochastic oscillates around the 80+ levels, the longer-term momentum will be up.

Shorter-Term Analysis

The lefthand chart shows the daily timeframe for XAUUSD—price is in gold's bullish zone, between the upper blue and red bands. As long as the daily chart maintains in this area, it is bullish for the precious metal. The chart on the right shows XAUUSD's hourly timeframe. Gold has pulled back to a confluence of support, i.e., the S1 pivot overlaps price resistance turned support (green shaded horizontal). To assess the strength of this level, the EMAs and the stochastic need to turn positive (black ellipses). This bullishness will suggest that market participants are targeting the confluence and using it as a platform to "buy the dip." If this charts, the sentiment may be swiveling from risk-on to risk-off.

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Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.


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