Spot gold is having trouble making new monthly highs.
Will the commodity extend its short-term downtrend?
Here’s a setup I found on the 1-hour time frame:
Gold (XAU/USD): 1-hour
Spot gold (XAU/USD) prices started falling in March when major central banks started hinting at aggressive interest rate hikes.
For newbies out there, higher interest rates and bond yields would mean higher opportunity costs for those holding non-yielding gold.
XAU/USD paused its long-term downtrend in mid-May when it ranged between $1,800 and $1,8800 but the lower highs and lower lows on the 1-hour chart suggest that the bears are ready for more action.
And it’s not just the unbroken trend line resistance that’s egging on gold bears! As you can see, XAU/USD is also trading near a key support in mid-June as well as the 50% Fibonacci retracement of last week’s downswing.
Add in the pull of the 100 and 200 SMA resistance levels and you’ve got yourself a bearish party.
This week’s FOMC meeting minutes and U.S. NFP release could make or break XAU/USD’s short-term downtrend.
The prospect of higher interest rates could drag gold prices back down to their July lows.
Meanwhile, an anti-dollar trend or a wave of risk aversion could bust XAU/USD above its trend line resistance and push the commodity closer to its $1,850 highs.
Watch the next candlesticks closely for the commodity’s next direction!
