The Price of Gold Continues Sliding. Investors Should Monitor These Critical Levels

Source: TradingView.com

Key Takeaways

Gold's retreat from its recent record high accelerated on Tuesday, with profit-taking weighing on the precious metal after strong gains in recent months. The commodity's retracement coincides with the relative strength index recently dropping below its neutral threshold, signaling waning bullish momentum and raising the possibility of a deeper short-term pullback. Investors should watch critical support levels on gold's chart around $3,850, $3,720 and $3,450, while also monitoring a key overhead region near $4,380.

Gold's (XAUUSD) retreat from its recent record high accelerated on Tuesday, with profit-taking weighing on the precious metal after strong gains in recent months.

The spot price of gold slipped below the $3,900/oz level this morning as signs of a potential breakthrough in U.S.-China trade talks ahead of a meeting later this week between President Donald Trump and Chinese President Xi Jinping eased demand for the safe-haven asset. Gold's recent decline has coincided with a stock market rally that continues lifting major indexes to record highs.

The price of gold, recently at around $3,910, has fallen 11% from the record high set early last week, though is still about 50% higher year-to-date, boosted by economic uncertainties, geopolitical tensions, and purchases by central banks around the world.

Below, we break down the technicals on gold’s chart and identify key levels worth watching out for amid the volatile trading.

Retracement Continues

After hitting its all-time high on Oct. 20, gold has undergone a retracement, a move that coincides with the relative strength index recently dropping below its neutral threshold, signaling waning bullish momentum and raising the possibility of a deeper short-term pullback.

In early trading Tuesday, the precious metal fell below the 38.2% Fibonacci retracement level when applying a grid from the August low to October high.

Let’s identify three critical support levels to watch following Tuesday's breakdown below this area and also point out a key overhead region worth monitoring if the price resumes its longer-term bullish trend.

Key Support Levels to Watch

Further selling could see gold decline to around $3,850. This area, which closely aligns with the closely-followed 50% Fibonacci retracement level and 50-day moving average, may provide support near a brief consolidation period on the chart in early October.

The next lower level to watch sits at $3,720. A pullback to this area may attract support near the 61.8% Fibonacci retracement level and a cluster of trading activity that formed on the chart during the second half of September.

Story continues

A deeper retracement in the precious metal opens the door for a retest of critcal support near $3,450. Investors may view this as a high probability accumulation area around a trendline that connects multiple prior peaks on the chart from April to July.

Overhead Region Worth Monitoring

If gold resumes its longer-term uptrend, investors should keep a close eye on the $4,380 region. This area could provide key resistance near a series if prices situated just below the commodity’s record high. A sustained breakout above this level would signal renewed bullish momentum and potentially set the stage for fresh all-time highs.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above securities.

Read the original article on Investopedia

View comments