It’s a rough start to the new year for gold as it is down 0.8% in the last two days, not really setting itself up for the usual January seasonal tailwind. There were some doubts already considering that we are at a technical top but the latest dip today now sees gold also fall below key near-term levels. In particular, the 200-hour moving average (blue line) is now being cracked:
Gold (XAU/USD) vs US 10-year yields (%) hourly chart
This now invalidates the recent upside momentum, with the near-term bias now favouring sellers instead. That comes as price is now trading under both the 100-hour (red line) and 200-hour moving averages.
That presents quite a bit of a challenge now for gold to try and build on its usual January seasonal tailwind. December was a good month for gold but as mentioned in this post here, there were some reservations to the high points as it comes during a time when liquidity conditions were thin.
Add to the fact that we are at a technical top near the 2020 highs at $2,075 – one that gold buyers have not cracked on the weekly chart – and there is a possibility of a squeeze lower. And that is being vindicated by the reversal of the sell the dollar, buy everything else mood yesterday and today.
There is now some minor support for gold from the Fib retracement of the swing higher from mid-December to late-December, seen at $2,030 and $2,044. But if we are to see broader markets stick with the theme this week, the big level to watch next for gold will be a retest of the $2,000 mark.