Gold Plunges Below $1,870 in a Triangle Breakout After Powell Speech

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The price of gold on Wednesday plunged to a new 6-week low of about $1,864 after breaking out of a triangle formation. The yellow metal has experienced strong bearish pressure since US Fed Chair Jerome Powell’s latest speech and updates on the economy.

The gold price has now crossed to the oversold levels of the 14-hour RSI in the 60-min chart. It is also several levels below the 100-hour and the 200-hour SMA lines. This could trigger a short-term rebound.

Gold Price Fundamentals Overview

The yellow metal appears to be trading under pressure following Fed Chair Jerome Powell’s testimony before the House Financial Services Committee on Tuesday. Powell said that demand for loans below $1 million in the Main Street Lending Program was in decline. This indicates that the banking system has performed very well lately amid the coronavirus pandemic. As such, the risk of a financial crisis in the country is lower than previously thought. This prompted a decline in the price of safe-haven assets like gold.

The latest economic data did not provide anything to suggest otherwise after the preliminary Markit Manufacturing PMI outperformed expectations. The Services PMI, however, disappointed while the PMI composite edged lower from the previous reading. The US House Price Index for July beat the (MoM) expectation of 0.5% with 1%.

Gold Price Technical Analysis (the 60-min Chart)

Technically, the price of the yellow metal appears to be trading under strong bearish pressure in the 60-min chart. The gold price recently made a bearish breakout of off a consolidative triangle formation to hit a new 6-week low of about $1,864. It is now in oversold levels of the 14-hour RSI.

The bears will be looking to extend the current downward movement towards $1,842 or lower at $1,816. On the other hand, the bulls will target short-term rebound profits at around $1,887 or higher at $1,914.

Gold Price Technical Analysis (the Daily Chart)

In the daily chart, the gold price appears to have made a sharp bearish breakout from a sharply ascending channel. This indicates a deliberate attempt by the bears to trigger a market reversal. Gold is now trading closer to the oversold levels of the 14-day RSI. It remains above the 100-day and the 200-day SMA lines.

The bears will target long-term profits at around $1,785 or lower at $1,704. On the other hand, the bulls will look to retail long-term control by targeting profits at around $1,945 or higher at $2,020.

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