Adding to the grief for investors, gold slipped to a 7 -month low following pressure on the strengthening US dollar ahead of the release of US services sector survey data and the minutes of the FOMC meeting in the New York session.
The risk of a global economic downturn has strengthened the value of the US dollar, but failed to support the gold surge as investors were seen preferring cash holdings over gold safe-haven assets.
Expectations of an aggressive interest rate hike by the Federal Reserve (Fed) also remain an additional factor to continue to support the US dollar thus pushing it to hit its latest 20 -year high in trading on Tuesday.
Investors will scrutinize the minutes report of the FOMC meeting to be published early Thursday morning to get a clearer signal on the interest rate hike at the next meeting.
Prior to that, investors will also look at the US services survey data first to be used as a guide to the US NFP employment data report that will be published over the weekend (Friday).
Observing the price movement on the XAU/USD chart which measures the value of gold against the US dollar, in the European session connected to the New York session yesterday the price of the yellow metal has plunged almost 500 pips thus recording the latest 7 -week low.
The price initially moved above the Moving Average 50 (MA50) support level on the 1 hour time frame on the XAU/USD chart in the Asian session yesterday then made a decline in the European session after the bearish movement signal and continued the more severe fall in the New York session.
The initial decline that passed the important level of 1800.00 was seen slipping lower until it also passed the lowest level reached last Friday's decline in the 1785.00 zone until the price reached the latest low at the end of the New York session around 1764.00.
The support zone at 1760.00 is seen to be tested for the expectation of a bearish pattern that will be extended for the price of gold to record the lowest level for trading this year.
The lower decline that continues beyond the zone is expected to lead to the support zone of 1720.00 after the last time the price touched that level in September last year.
On the other hand if the rise in the price of gold occurs again, the price is likely to first test the resistance at the 1785.00 zone before the higher rise continues will return to the focus zone of the 1800.00 price.
