Should Gold Bears Be Worried?
MarketPulse | Apr 24, 2019 04:15PM ET
Gold remains vulnerable at the moment, despite making small gains on Wednesday.
The fact that the dollar continues to look strong is a significant headwind for the yellow metal, with the risk environment on the backs of various central banks settling nerves while also dragging on the price.
We broke below $1,280 last week, which was a technically significant breakout and drew attention to $1,260 below it where a prior area of support and resistance crosses with the 200-day simple moving average.
h3 The Good News/h3The bullish case for gold is not dead, though, despite all of the above. For one, we’ve hardly seen a boost in downside momentum since the break below $1,280 and we saw a second test of this from below on Wednesday. Each new low is quickly bought into, which is often a bad sign.
What’s more, it seems that dollar gains are not weighing too heavily on gold – particularly on Wednesday – while any weakness is getting quite a response to the upside. This could be a worrying sign given the correlation between the two. Perhaps an early red flag for the bears.
All things considered, the downtrend may be weakening, right now, but as long as we remain below $1,280, the key level in gold remains $1,260, a break of which may deliver the momentum we lacked over the last week.
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