Before the release of important economic data, such as the US Consumer Price Index, gold market observers pause.
Prior to the risk of a significant event, the gold selloff slows.
According to the weekly gold chart analysis, a major decline in the gold selloff trend has been seen, especially during the last week, which led to the construction of a doji candle, which represents market uncertainty. The many upper wicks on the weekly candles indicate that market players were reluctant to push gold prices higher than the 1910 level, which resulted in a severe decrease in prices.
Effects of Upbeat Economic Data
The daily chart shows the significant selloff following the Federal Open Market Committee (FOMC) meeting, which was exacerbated by the excellent US job statistics and fantastic PMI ‘new orders’ data. Positive economic indications had a double effect, which prompted a more aggressive revaluation of dollar-linked assets like gold.
Gold’s Allure Has Declined
Gold’s attraction diminished when the market increased the value of the US dollar and Treasury rates, notably the 2-year yield, because it offers no dividend.
Grizzly Formation
Gold prices displayed a possible bear flag pattern following the sharp selloff as bull traders attempted to make up some of their losses. For the pattern to properly develop, there is still a great deal of ground to cover. A move towards the 200 simple moving average (SMA) at 1775 may be inevitable given the bearish trend’s persistence.
Important Psychological Level
To maintain the negative trend, bears must lower gold prices below the psychological level of 1800. There may be another round of dollar re-pricing, this time to the downside, which might give gold prices short-term support if the rate of disinflation picks up and there is a surprise to the negative.