Gold prices experienced a significant decline yesterday Wednesday as the market reacted to the published United States (US) economic data.
The latest encouraging data readings have increased demand for the US dollar while the attraction for gold assets has begun to decline.
The flat upward movement throughout Tuesday began to show a change in pattern with a sharp price plunge to a new low.
Observing the XAU/USD chart that measures the value of gold against the US dollar yesterday, the price, which was flat around the 3330.00 level, then showed a drastic decline.
Until the close of the New York session, the price had reached a new 4-week low around 3270.00 after the FOMC meeting ended.
The situation changed in the Asian session this morning (Thursday) with the price showing a recovery back to around 3300.00.
However, the price movement is still below the Moving Average 50 (MA50) resistance line on the 1-hour time frame of the XAU/USD chart, which signals the risk of further price declines.
Failure to break through the 3300.00 level is likely to see gold decline further to a new 11-week low.
The next target for the price decline is expected to reach around 3200.00 if the bearish pattern continues.
However, if the rise occurs beyond the MA50 barrier, the gold price will show the potential to recover higher.
If the attraction towards gold increases again, the price could reach up to the 3400.00 level after falling from that height last week.
