The sell-off in gold has been protracted. It has fallen over 12% since hitting a record high of $2,082 just six months ago. It is currently hovering above $1,800 – a level which acted as support between February and March this year, and as resistance in August last year.
Gold was trading at $1,600 in November 2022, before it rallied sharply to hit May’s record high. Given these big swings, there’s no reason to think that its current value of $1,800 should represent a overly-significant level of support.
Yet the 5% sell-off since mid-September could be overdone. Although it is the vicious 12% slump in silver over the same period which feels like a proper bloodletting. Have these moves been severe enough to drive out the weaker holders, and so set the scene for a rebound, or is there more downside to come?
A lot of the analysis of precious metals centres around the state of the US dollar. Gold is weak, in dollar terms, because the dollar is strong. If you subscribe to that opinion, then you’ll be looking for a top in the dollar, and bond yields, before you would go long gold.
But perhaps it’s better to keep things simple, and consider each chart on its own. A look at the daily gold chart shows the MACD falling sharply along with the gold price. But looking at the 4-hour chart, shown above, we can see that the MACD has reversed direction, appearing to bottom on Tuesday, as gold tries to consolidate at these lower levels. Could this be an early indication that we’ve found, or are approaching a bottom? Maybe. But as we know, there’s still plenty of downside potential so it is wise to be cautious.
Gold was trading at $1,600 in November 2022, before it rallied sharply to hit May’s record high. Given these big swings, there’s no reason to think that its current value of $1,800 should represent a overly-significant level of support.
Yet the 5% sell-off since mid-September could be overdone. Although it is the vicious 12% slump in silver over the same period which feels like a proper bloodletting. Have these moves been severe enough to drive out the weaker holders, and so set the scene for a rebound, or is there more downside to come?
A lot of the analysis of precious metals centres around the state of the US dollar. Gold is weak, in dollar terms, because the dollar is strong. If you subscribe to that opinion, then you’ll be looking for a top in the dollar, and bond yields, before you would go long gold.
But perhaps it’s better to keep things simple, and consider each chart on its own. A look at the daily gold chart shows the MACD falling sharply along with the gold price. But looking at the 4-hour chart, shown above, we can see that the MACD has reversed direction, appearing to bottom on Tuesday, as gold tries to consolidate at these lower levels. Could this be an early indication that we’ve found, or are approaching a bottom? Maybe. But as we know, there’s still plenty of downside potential so it is wise to be cautious.