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Gold Rebounds Back to Resistance Following A Break Down.

February 9, 2021

Talking Points:

● Last week Gold price brock down. However, Gold is currently experiencing a rebound.

● Currently, Gold is testing resistance at the previous support, keeping the bearish sentiment.

Last week saw a flourish of selling in Gold that pushed it to a new two-month-low. This was accompanied by a weak USD. Friday saw an easing, helped along by the USD, and the Gold bulls have maintained the rebound so far at the start of this week.

The big question is whether this is just a pullback ready for another surge of bearish price action; or whether that test below 1800 USD signalled some type of capitulation from Gold bears.

Gold Daily Price Chart:

At present, the resistance zones come from an interesting point on the chart that was previously a support level in mid-December last year, and again in mid-January of this year. This zone lies between 1825.31-1836.87 USD.

Gold is Tracking the USD.

Currently, the inverse correlation between Gold and the USD seems to be back in order, as highlighted on the lower part of the chart below. And seeing that the USD has spent much of the year in a counter-trend pattern, it seems likely that a key driver for Gold is going to be the performance of the USD.

Gold Daily Chart With USD Correlation Applied:

Currently, the USD has pulled back to test trendline support from previous resistance. If this holds we could see a further breakdown for Gold, highlighted by the lower-high resistance at the previous support following the breakdown from the symmetrical triangle pattern.

However, if USD bears come back in strength, as seen in the last eight months of 2020, Gold prices could rally to the upside and given the recent test below 1800 USD, we could see some of the older positions with stops changed to around psychological levels will have been pushed out of the market.

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