The price of gold (XAU/USD) appears to have established a new support level around $1,270 after dropping to a new yearly low of $1,267 earlier in the week.
The yellow metal has been on a downward trending movement since April 13 and that decline culminated in the XAU/USD trading at $1,267 on Tuesday for the first time this year.
However, the yellow metal has recouped a small slice of those losses edging upwards towards last Month’s lows of about $1,283 per ounce.
XAU/USD (Gold) Fundamentals Overview
From a fundamental perspective, the price of gold appears to have dipped following the beginning of another US stock market earnings season, which tends to drive investors towards risky assets like stocks.
Furthermore, the US economy has remained steady despite the announcement by the Federal Reserve that there will be no interest rate activity (so no rate hikes) in 2019. Investors appear to have picked the positive side of this statement, which also implies there will be no rate cuts.
The economic data from the US Department of Commerce and the labor market also appear to be supporting a stronger US economy with jobless claims numbers falling.
XAU/USD (Gold) Technical Analysis (the 240-min Chart)
Technically, the price of gold appears to have dropped to a new trading range around $1,270-$1,280 levels. The XAU/USD has not traded within this range since the start of the year.
This suggests that even though the fundamentals point towards a continued decline in the price of gold, the bulls will be hoping that the year 2019 trading range that has been above the $1,290 mostly could push XAU/USD back up. As such, they will target opportunities at $1,280 and $1,283.
On the other hand, the bears will claim control of the bear market and target profits at $1,272 and $1,269 in the short-term.
XAU/USD (Gold) Technical Analysis (the Daily Chart)
In the daily chart, the pair appears to have completed a cup and handle pattern formation, with the handle forming within a sharply descending channel. Again, this indicates that the bears might have control, but the bulls will look to pounce on any short-term rebounds.
In summary, the XAU/USD (Gold) has plunged to new yearly lows and this is down to the strength of the greenback, the US earnings season and steady US economy. The bears appear to have control but the bulls will also have opportunities.