Gold prices took a dive early US session, with spot gold down to $1,163.50 a troy ounce, a fresh 5-day low.
There was no clear catalyst beyond the decline except for some limited dollar demand, mostly due to the inability of its counterparts to rally rather than self-strength.
For this Thursday, it’s worth remembering that gold tends to move in tandem with the EUR, meaning that if somehow, the common currency strengthens after the ECB’s decision, gold prices may recover the lost ground.
The opposite is also valid, with a decline in the EUR dragging gold lower. Spot gold has extended its decline below the 23.6% retracement of its latest advance, and the daily chart shows that, despite the price is still above its moving averages, the technical indicators present strong bearish slopes, increasing the risk of further declines, at least from a technical point of view.
In the 4 hours chart the price is now developing below a bearish 20 SMA whilst the technical indicators stand below their mid-lines, with the RSI indicator anticipating also a continued decline as its turning lower around 41.
Our preference: Short positions below 1172 with targets @ 1161 & 1156 in extension.
Alternative scenario: Above 1172 look for further upside with 1181 & 1184.5 as targets.
Comment: As long as 1172 is resistance, likely decline to 1161.