Gold price breaks short-term support, here are levels to look for
- The U.S. dollar was headed for its best week in three months, sending gold prices lower this week
- Gold price is now trading below the ascending trend line at $1,840 an ounce, which will now act as resistance
- The next target on the downside is $1,764, an area where the most recent pullback stopped
Gold price has rebounded about 0.7% higher on Friday to reduce weekly losses but is still on track to close the week over 2% in the red.
Fundamental analysis: Dollar strength drives gold lower
Silver is also having a poor week after a sharp drop from multi-year highs it touched earlier this week as a result of increased retail interest.
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“There is some technical rebound as investors think Thursday’s drop was overdone, but overall trend in gold remains bearish on rising dollar and yields,” said Margaret Yang, strategist at DailyFX.
On the other hand, the U.S. dollar was headed for its best week in three months, while U.S. Treasury yields also advanced.
“The economic outlook is definitely brighter with vaccines bringing down daily COVID-19 infections, and the macro data is improving, undermining the demand for precious metals as a store of value,” Yang added.
Today’s rebound in EUR/USD and other major currencies against the dollar facilitated a jump in gold prices.
Technical analysis: Bearish development
Gold price has jumped today after dropping to a more than two-month low in the previous session while the bullion was headed for its biggest weekly fall in four due to a stronger dollar.
Spot gold advanced 0.3% to over $1,800.00 per ounce Friday, after losing more than 2% to its lowest mark since December 1 on Thursday. The bullion is therefore trading about 2.2% in the red this week and is headed for its biggest drop since the week ended January 8.
More importantly, the gold price is now trading below the ascending trend line at $1,840 an ounce, which will now act as resistance. The next target on the downside is $1,764, an area where the most recent pullback stopped, which is also a chance for gold buyers to get on the long side.
Gold price gained some ground to reduce weekly losses after it was headed for the sharpest decline since the week ended January 8.