The technical lines in the sand have shifted in gold

Gold has been in hot form since the start of the year and racked up eight straight weeks of gains up until now. This is the first week where that win streak is now under threat, with gold now down 0.7% on the week. That owes to the drop yesterday and while gold is holding back above $2,900 for now, it’s crucial to take note of a shift in the technical lines.

The near-term chart shows how unrelenting the bullish momentum has been since the turn of the year. Price action has been running above both its 100-hour (red line) and 200-hour (blue line) moving averages for the past seven weeks. There have been a couple of tests of the key near-term levels but none were decisive breaks whatsoever.

That is up until what we saw with yesterday’s fall. Dip buyers did step back in quickly but the rebound was arrested by the 200-hour moving average itself.

What was a key near-term support level before has now turned to a key near-term resistance for gold. In other words, sellers are now defending that level in trying to keep the shift in the downside bias from yesterday.

This now puts gold in a rather interesting position on the week. It’s been a while since we saw the technical lines shift to the other side. So, will sellers capitalise to go in search of a stronger pullback? And for the bulls, is this going to see some added profit taking considering the change in the technical consideration?

The daily and weekly charts are still not showing much let up in the upside run though. But every retracement begins with small steps, and it’s important to take notice of this one in case it does begin to gather pace.

This article was written by Justin Low at www.forexlive.com.