Gold took a knock after the hotter-than-expected US CPI report, with the precious metal briefly dipping back below the $4,100 mark yesterday. The drop at the time touched a low just under $4,080 before dip buyers stepped back in to arrest the decline.
It seemed like a relatively straightforward move at first but with the dollar and Treasury yields reversing their respective advance, we are seeing gold also bounce back today. The precious metal is being afforded some breathing room again with price now recovering to $4,140 levels.
That throws the ball back over to the buyers’ side of the court. Can they actually turn that into something more meaningful?
Looking at the near-term chart above, there’s certainly some encouragement for buyers. The latest rebound once again highlights the willingness to defend the downside, with gold recovering back above $4,100 after the sharp plunge yesterday. Having said that, I would not get too carried away with the bounce we’re seeing just yet.
The key hourly moving averages continue to present a challenge, with the confluence of the 100-hour (red line) and 200-hour (blue line) moving averages around $4,150-64 having posed as key near-term resistance points for the precious metal in the past weeks.
Beyond that, the $4,200–20 region remains the bigger obstacle. We’ve seen multiple attempts to push through this area in recent weeks, only for sellers to repeatedly spoil the party.
Besides that, the daily chart also continues to reinforce the need for caution.
The $4,100-20 region has been an important support area since the end of September, with the 78.6 Fib retracement level at $4,117 also coming into play. Despite yesterday’s brief break lower, buyers have managed to keep that broader support area in contention for the most part.
However, that is not to say that the downside pressure has dissipated entirely. Gold is also still trading below its 100-day moving average (red line) of $4,245 and that adds another layer of resistance on top of the already stubborn short-term region around $4,200-20.
For now, it seems that dip buyers have done just enough to prevent a more convincing breakdown after the US CPI report. However, that is still not quite enough to suggest that the tide has turned. Buyers will need to get through $4,200-20 as the first hurdle before making a stronger case for that.
This article was written by Justin Low at investinglive.com.