Gold continues its slide this week to its lowest levels since 22 July
The first warning sign for gold was the break of the wedge consolidation at the start of the week, followed by the breach under $1,900. The drop continued into trading yesterday where we saw price action briefly fall below the 12 August low @ $1,863.15.
That level held into the close - barely - but we are seeing the downside pressure continue today in a move to fresh lows since 22 July with the low today touching $1,849.04.
Of note, that moves price action closer towards a test of the 100-day MA (red line) @ $1,843.82 and that is the next key technical test for gold ahead of the weekend.
The main driver for the downside move in gold has been the push higher in the dollar. The traditional risk-off play of gold also gaining as equities sell off hasn't been a staple during the virus crisis and it was the same story again yesterday.
Stocks sold off hard and yet gold failed to hold its ground and was sent tumbling instead.
As mentioned before, the long-term prospects of gold remain rather attractive but right now sellers are still making a play as evident by the technical picture above.
The 100-day MA may present a key area for buyers to make a stand but amid the nerves we're seeing in the equities space, I'm not as confident about that at the moment.
The play since the end of last week was supposedly that of a dollar corrective move i.e. squeeze on short dollar positions, but if the equities selloff threatens to be something more major then perhaps liquidity fears may spark further gains in the greenback.
As such, that could also weigh on gold even more over the next few sessions.
But should there be a more major correction in gold towards the downside, I would continue to argue that it would make for more attractive levels for a long-term trade.
Any dip below $1,800 towards the 200-day MA (blue line) will be well worth looking into for prospective buyers in the bigger picture in my view.
