Gold is trading sharply lower, down around $112, or 2.82%, at $3875 after reaching a session low near $3852.
The decline in gold is also being reinforced by a higher US dollar and sharply higher Treasury yields. The US 2-year yield is up nearly 14 basis points at 4.86%, while the 10-year yield has climbed nearly 12 basis points to 5.11%. A stronger dollar makes gold more expensive for buyers using other currencies, while higher yields increase the opportunity cost of holding the non-interest-bearing metal. Together, those moves are adding to the selling pressure as gold breaks below key technical support.
The selling has taken the price below the low from late October/early November near $3870, extending the bearish sequence on the 4-hour chart.
The sellers are making a bigger play. The buyers have work to do to take back control.
Failed rallies set the stage.
Earlier this week, buyers had opportunities to shift the technical bias. Monday’s rally moved above the 200-bar moving average on the 4-hour chart, while yesterday’s advance pushed above the 100-bar moving average. Neither break could be sustained.
Those failed breaks matter. The buyers had their chance to build upside momentum, but the inability to hold above the moving averages put the sellers back in control. Those averages now sit near $4027 for the 100-bar and $4090 for the 200-bar, providing overhead resistance.
The old floor becomes a ceiling.
Today’s decline also broke below the swing area between $3942.71 and $3959.37. That area had provided a floor on several occasions going back to July. With the price now below it, the area becomes a key risk and bias-defining ceiling.
Stay below, and the sellers retain firm control. A move back above would ease some of the immediate downside pressure and give buyers a foothold. However, they would still need to reclaim the falling moving averages to strengthen the recovery.
What comes next?
The late-October/early-November low near $3870 is the first nearby barometer. Gold is trading just above that level after bouncing from today’s low, so traders will be watching whether the recovery can hold or whether sellers force the price back below it.
Below today’s $3852 low, the next major downside target comes near $3800, where the lower boundary of the descending channel is currently located. That trend line is moving lower over time.
For traders, the lesson is straightforward: a sharp fall alone does not establish a bottom. Buyers need to reclaim broken levels and hold above them. Until that happens, rallies toward resistance give sellers defined levels to lean against, with $3942–$3959 the key ceiling to watch.
This article was written by Greg Michalowski at investinglive.com.