Category: Forex News, News

Bearish Continuation in Play with Key Support Under Threat

By Published On: June 1, 20241.7 min readViews: 2220 Comments on Bearish Continuation in Play with Key Support Under Threat
Most Read: Market Sentiment Analysis & Outlook – EUR/USD, USD/CAD, Dow Jones 30

Gold (XAU/USD) has enjoyed a remarkable rally this year, peaking near $2,450 in early May. However, the upward impetus has recently started to wane, with bullion retreating over 4% from its highs in the past few trading sessions. This price correction suggests a shift in investor sentiment, with bulls likely seeking greener pastures.

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With underlying and fundamental drivers reasserting themselves, gold’s weakness could persist in the near term. Sticky inflation, which could force the U.S. central bank to maintain a restrictive stance for longer, could reinforce the bearish case for non-yielding assets, creating a hostile environment for the yellow metal.

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For traders entertaining short positions, a crucial price point to watch is the $2,335 support zone. This area represents a confluence of technical indicators, including a key trendline and the 38.2% Fibonacci retracement of the March-May rally. A decisive break below $2,335, accompanied by higher-than-average trading volume, would be a strong selling signal.

If the price falls through $2,335, the next line in the sand is the 50-day simple moving average, currently sitting at $2,325. Breaching this support could trigger a deeper pullback, with potential downside targets around $2,265, a critical Fibonacci level just below this month’s swing low.

However, the scenario isn’t entirely one-sided. If the bulls regain control and push prices higher, initial resistance looms at $2,365, followed by $2,377. A push past this latter ceiling could dampen bearish sentiment and pave the way for a rally toward $2,420. Continued strength could even bring the all-time high back into play.

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GOLD PRICE TECHNICAL CHART

Gold Price Chart Created Using TradingView


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