Part of the reason gold has been strong is because quantitative easing and similar monetary actions have essentially raised the supply of fiat currencies reducing their value relative to gold. As gold (XAU/USD) is priced in the greenback, a reduced expectation of QE by the Fed can be a bearish factor. The FOMC statement on 3/13 gave a modestly positive outlook on the economic recovery thus reducing expectation of QE.
Gold fell back to test an important support level. The daily chart shows a ranging market between roughly 1520 and 1802. The central pivot, not necessarily in the the actual middle but rather a common pivot point near the middle, is just above the 1660 handle. A break and hold below 1660 could extend the current bear run down toward 1520-1560 range support area.
Furthermore, if the daily RSI reading falls back below 40, it shows loss of bullish momentum, confirming that the market continues to be sideways instead of bullish.
The 4H chart shows a bearish momentum established in the short-term. The RSI reading failed to break above 60 and a return below 40 confirms maintenance of bearish momentum. This would be good clues to go along with a break below 1660 for the bearish outlook toward 1560.
We’ll follow up with the outlook on gold during the Market Intelligence Briefing on Wednesday 3/14 8:00ET.
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Fan Yang CMT is a forex trader, analyst, educator and main contributor for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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